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THE NATIONAL LOGISTICS POLICY- A step towards becoming a $5 Trillion economy

“Logistics is the ball and chain of armoured warfare.”- Heinz Guderian


The National Logistics Policy (NLP) 2022 is a comprehensive effort to address issues of high indirect costs and inefficiency for the development of the logistics sector, promoting economic growth.

Prime Minister Narendra Modi launched the National Logistics Policy (NLP) on 17th September 2022 in Vigyan Bhawan, New Delhi to promote digitisation in the logistics sector.

Commerce and Industry Minister Piyush Goyal said that the main motive of the policy is to promote the seamless movement of goods and enhance the competitiveness of the industry across the nation.

Meaning of Logistics

The term "logistics" describes the process of management and movement of goods and services from the point of their acquisition till the delivery to their final location.

It includes locating distributors and suppliers and evaluating the accessibility of such parties.

It is a process that combines procurement of inventory, packaging, transportation, and storage in a way that is both cost-effective and profitable.

What is National Logistics Policy?

The National Logistics Policy (NLP) 2022 is a comprehensive effort to address issues of high indirect costs and inefficiency laying down a cross-sectoral, multi-modal and jurisdictional framework for the development of the logistics sector promoting economic growth. It is the result of 8 years of constant effort by the government to curtail logistics costs and achieve global recognition and dominance. It will focus on some key areas like business process re-engineering, digitisation and multi-modal transport. It will establish a single-window e-logistics marketplace for the standardization of physical assets, development of human resources, and building of logistics parks. The whole logistic ecosystem consists of more than 20 government agencies, 40 PGAs (Partner Government Agencies), 37 export promotion councils, 200 shipping agencies, 36 logistics services, 129 ICDs (Inland Container Depots), 168 CFSs (Container Freight Stations) and 50 IT ecosystems, banks and insurance agencies. So this policy has been proposed to manage such a vast and fragmented sector. In addition to economic growth, this will notably benefit the agriculture and MSMEs sector. As per the statement of the ministry,“NLP will boost a 10 per cent decrease in indirect logistics cost leading to a growth of 5 to 8 per cent in exports”.


Why do we need a logistics policy?

Presently, the expenditure of India's logistics is 14 per cent of its Gross domestic product whereas countries like Japan and Germany only spend 8-9 per cent. So it was felt that the logistics cost of India is comparatively higher than the other developed countries which hamper the overall economic growth. It is imperative to reduce the logistics cost in India for improving the competitiveness of Indian goods both in domestic as well as export markets. For this purpose, E-Sanchit enables paperless export-import trade processes, E-Way bill and FASTag were introduced to improve the efficiency of the logistics sector last year. The new national logistics policy aims at curtailing the issues faced in this sector like lack of infrastructure, unpredictable supply chains, unorganized nature, and poor connectivity as this sector majorly focuses on transportation through roads. Reduction in the logistics cost will improve efficiency across various sectors of the economy while encouraging value addition.

Four major steps under National Logistics Policy

Integration of Digital System (IDS): With this digitization, 30 different systems of seven various departments (like road transport, railways, aviation, commerce ministries and foreign trade) will be integrated.

Unified Logistics Interface Platform (ULIP): This will ensure seamless cargo movement on a real-time basis. Additionally, the National Industrial Corridor Development Corporation's (NICDC) Logistics Data Bank Project has been initiated.

Ease of Logistics (ELOG)- This will enable and ensure the ease of logistics business through transparency and viability. Similarly, a new digital platform Ease of Logistics Services (E-Logs) has also been started for industry associations to share their issues and grievances directly with the government.

System Improvement Group: With the help of this system, all logistics-related projects can be monitored regularly.

Vision

Reduce the cost of logistics in India to be comparable with global benchmarks by 2030: The main motive behind this policy is to reduce the logistics cost to 10 per cent by 2030. This will also improve the Logistics Performance Index ranking. India aims to be among the top 25 countries. In 2018, India was ranked 44th in the World Bank Logistics Performance Index, a measure through which the Bank ranks countries based on their logistics performance.

Create a data-driven decision support mechanism for an efficient logistics ecosystem: India has a complex regulatory environment, with multiple and overlapping regulations governed by various stakeholders. Additionally, there is also a low level of technology adoption among various stakeholders.

NLP will also bring new energy to all other sectors. As logistics develop, manufacturing, production, automobile, and other industries like warehousing and infrastructure development will also develop.

Measures to be taken in future

India’s transport system is very skewed and almost 60 per cent of freight moves through roads where a large part of truck owners serve 2 /3 tier cities aiming at micro and small operators. There is a need for engaging more large-scale operators to further lower the cost. If the logistics cost has to be almost halved, more emphasis must be given to the rail sector which is currently suffering from configurational deficiencies. India’s railroads consist of one-third of the total its freight.

Many new waterways have to be built for eco-friendly and cost-effective freight movement. PM Modi in his speech mentioned that the total capacity of Indian ports has increased and the average turn-around time of container vessels, that is the time difference between the date of arrival and date of departure of container vessels at the ports, has come down from 44 hours to 26 hours. The size of the ports has to be enhanced significantly to reach global benchmarks. We must take valuable lessons from China's investment in port infrastructure.

To enhance air logistics, 40 air cargo terminals have been constructed, and 30 airports have been provided with cold storage facilities. Moreover, the government is planning to construct 35 multimodal hubs.


Did you know

The worth of the Indian logistics market is estimated at over $200 billion. The sector provides livelihood to more than 22 million people.



BY:

Ishika Nakra


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