Distributive policy

National Logistics Policy—A Program Whose Time Has Come

Napoleon Bonaparte once said: “Amateurs discuss tactics: professionals discuss logistics”.

While this primarily alluded to warfare, the modern equivalent of it can be found in the way nations progress.

After economic collapse, including the “Great Contraction” in the United States of 1929-1933, President Franklin D. Roosevelt upon taking office in 1933 introduced the “New Deal”.

Among a series of reforms this involved, one was the establishment of the Public Works Authority (PWA), which included a comprehensive infrastructure upgrade covering roads, bridges, dams, airports, hospitals, etc., all relating to logistics.

The result has been to restore public confidence and create new programs that tackle unemployment.

India has undergone a major logistics transformation.

On the eve of Independence Day 2021, Prime Minister Narendra Modi had announced from the ramparts of the Red Fort an ambitious Gati Shakti Master Plan, with an outlay of Rs 100 lakh crore, which would bring together 16 infrastructure-related ministries on a platform. – common numeric form.

While Gati Shakti will be a game-changer for India’s infrastructure landscape, the momentum in logistics has taken a boost with the launch of the National Logistics Policy (NLP) by the Prime Minister on September 17, 2022.

The cost of logistics in India accounts for around 13-14% of our Gross Domestic Product (GDP), compared to around 8% in the developed world.

India’s logistics industry is estimated at over $200 billion and the sector supports over 22 million people.

Naturally, the need to reduce inefficiencies and costs in the logistics space has been felt by the government for a few years now.

The roots of NLP were first laid in 2020 during Finance Minister Nirmala Sitharaman’s budget speech.

The key to this will be to have an integrated and technological approach to the logistics sector, with the aim of closing the efficiency gap.

The key principles of the NLP will be a unified logistics interface platform, standardization of physical assets and benchmark service quality standards, state commitment, human resource development, capacity building, export-import logistics, sector plans and facilitation of the development of logistics parks.

Streamlining processes within the logistics industry is paramount in India, mainly because the industry is inherently complex in its structure.

Over 20 government agencies, 40 PGAs (partner government agencies), 37 export promotion councils, 500 certifications, over 10,000 commodities, 200 shipping agencies, 36 logistics services, 129 Inland Container Depots (ICDs), 168 Container Freight (CFS), and 50 IT Ecosystems — are some of the entities that look after this vast logistics network in India.

The simplification of this system is clearly the demand of the day.

Four key imperatives stand out within NLP. They are as below:

Digital System Integration (IDS): Collecting data from seven different departments (road transport, railway, customs, etc.), 30 disparate systems will be integrated under IDS.

Goods movement times are expected to decrease, with concomitant benefits for working capital and costs.

Unified Logistics Interface Platform (ULIP): Smooth and frictionless freight movement will be monitored through ULIP.

Ease of Logistics (E-LOG): Simplifying a myriad of rules will contribute to faster turnaround times.

System Improvement Group (SIG): This will monitor all logistics projects and report any potential challenges at any time.

In addition to the above, the NLP is also expected to bring additional benefits such as one-stop approvals, ease of movement of goods through Indian Railways through additional infrastructure investments, and improved overall operational efficiency.

The second-order impact of these infrastructural and logistical improvements would be a “multiplier effect,” which is typically 2.5 to 3.5 times.

This means that for every rupee spent by the government to create infrastructure, the GDP would gain 2.5 to 3.5 rupees.

Currently, about 64% of cargo in India moves by road.

As diesel is the main driver of road transport, any spike in oil prices would increase the total landed cost of the items.

A higher share of rail in modal transport is therefore desirable, also because it is a more efficient method. NLP will be a key enabler for this.

NLP will strengthen local manufacturers in all sectors, enable cargo and passengers to move quickly from place to place, and become a push factor for our exports.

If properly implemented, it will be the much needed booster for our country’s infrastructure dreams.

When President Roosevelt introduced the “New Deal” for the United States, he proclaimed:

“Across the country, men and women, forgotten in the political ethos of government, look to us here for guidance and a fairer opportunity to share the distribution of the national wealth…I pledge to a new deal for the American people. It’s more than a political campaign. It’s a call to arms.”

Indeed – our National Logistics Policy may be just that – a revolutionary cornerstone of India’s infrastructure turnaround.

The cheetahs have roared, and India is confident of benefiting from their agility for decades to come.