National Logistics Policy – A Brief Look

National Logistics Policy 2022 is a policy initiative aimed at improving India’s overall efficiency in logistics. Here we take a brief look at what it means.

Major hurdles in the logistics industry:

India’s logistics costs amount to 13% to 15% of GDP. The country ranks 44th in logistics, while the economy ranks fifth in the world. Indian long-haul logistics is dependent largely on road transport as bottlenecks in their means of transport like railways and waterways abound. Trucks in India run around 300 kms in a day compared to a global average of 400-500 km. Out of this, the empty drive rate is as high as 40% - the primary reason being a lack of information and coordination. The railway is the second most opted medium in the country. However, both goods trains and passenger trains are run on the same rails and the passenger trains are given higher importance. Safety from damage and theft is inadequate and leaves businesses open to liabilities during goods transport. Moreover, dependency on other modes to transport goods through rail as the railway network is not always closely integrated with manufacturing and warehousing hubs.

Cost per ton-km across various modes in India

What is the government trying to achieve with the New Logistics Policy?

The main objective is to reduce costs incurred in logistics from 15% to around 8% of the GDP in the coming years. This should help in building an efficient warehousing system and creating hubs or centres for streamlining the entire supply chain process and reducing the bureaucracy and promoting cooperative federalism in trade and commerce. Reduced logistics costs should help in the accelerated growth of enterprises, SMEs and MSMEs thereby generating more employment opportunities and the development of human capital. It should also help in the emphasis on “Supply Chain Management” as an area of study and career.

Methods proposed under the policy

NLP proposes a Unified Logistics Interface Platform(ULIP) - a single portal comprising all the digital services related to logistics bringing together the unorganised service providers to standardise cost.   A common tracking of inventory levels to better facilitate the demand addressing capacity and introduction of advanced technology in tracking and coordination of various services. Ease of Logistics Service (ELOG) will be launched for grievance redressal and support to aid the continued smooth functioning of operations. ULIP is also to be well integrated with digital tools across the logistics value chain to provide an end-to-end dashboard for efficient planning and execution. 30 logistics systems of 7 Ministries/Departments have been integrated through 102 APIs with ULIP. The aim is to create a UPI kind of structure in which every single transaction of the logistics department can be authenticated.

Integration of ULIP with other digital tools

Possible hurdles that must be addressed

Huge costs are needed for the initial infrastructure developments primarily in roads, trucks, rails, warehouse development and technology implementation. Logistics is largely a disorganised market and implementation of uniform systems can be initially challenging. Reduction of tax revenue on various fronts for the government might cause bias in the effective implementation of this policy. As a digital system, system availability, efficient and fast operation, maintaining resilient and reliable backup facilities and cybersecurity are very important for smooth functioning. Any disruption that causes a delay could cause higher losses under the hub system.

How will it help?