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National Logistics Policy

  Jul 27, 2020

National Logistics Policy

What is logistics?

Logistics is management of flow of goods from origin to destination to meet customer requirements in minimum time at minimum cost.

Logistics is used more broadly to refer to the process of coordinating and moving resources – people, materials, inventory, and equipment – from one location to storage at the desired destination. The term logistics originated in the military, referring to the movement of equipment and supplies to troops in the field.

Logistics include packaging, warehousing, transport and delivery of raw materials and final goods.

How do you measure trade logistics?

Why are trade logistics important?

An effective and efficient logistics ecosystem can be a key contributor to robust economic growth in the country, as this sector is one of the most important accelerators of trade in the country. Specifically, an efficient supply chain network has the potential to increase farmers’ incomes manifold, which can lead to a domino effect on the overall economy. logistics being a critical driver of economic development, needs urgent attention. NLP is timely initiative in this regard. An effective and efficient logistics ecosystem will be one of the drivers of the Indian economy.

What is logistics problem of India?

The cost of logistics in India is 13-14% of the gross domestic product (which is over $2.5 trillion) and is much higher than in other countries. This reduces competitiveness of Indian goods in domestic and international markets. The target is to reduce it to about 10% in the coming years with concrete measures. India slipped from 35 in 2016 to 44 in 2018 in logistics performance index of world bank. 

Reasons of inefficient logistics in India

  1. Lack of basic infrastructure
  2. The sector continues to be highly unorganized. 
  3. India also has a skewed modal transportation mix, with 60% of freight moving on roads, which is significantly larger than in key developed economies.

What steps are taken by government to reduce logistics cost?

  1. Infrastructure status has been given to logistics
  2. BHARATMALA, SAGARMALA, Dedicated Fright corridors, National waterways 1, many other mega projects in infrastructure
  3. Accession to UNTIR
  4. Ratification of Trade facilitation agreement under WTO
  5. Logistics Efficiency Enhancement Program (LEEP)  
  6. Logistics Ease Across Different States (LEADS) index
  7. E way bill under GST
  8. Mandatory FASTags on highway toll booths

What are advantages of better performance of logistics?

  1. Save in cost of manufacturing, transportation
  2. More choices to customers
  3. Environmental benefits, low carbo footprints and pollution
  4. Increased export competitiveness of a country
  5. Job creation 
  6. Regionally balanced economic growth
  7. Agriculture, animal rearing more processing more dividends to primary producers

What are key features of proposed NLP?

  1. It will enable creating a single point of reference for all logistics and trade facilitation matters in the country, which will also function as a knowledge and information sharing platform.
  2. It will also help in driving logistics cost as a percentage of GDP down from estimated current levels of 13-14% to 10% in line with best-in-class global standards and incentivize the sector to become more efficient by promoting integrated development of logistics.
  3. Further, it will optimize the current modal mix (road-60%, rail-31%, water-9%) in line with international benchmarks (25-30% share of road, 50-55% share of railways, 20-25% share of waterways) and promote development of multi modal infrastructure.
  4. The policy will also go a long way in improving first mile and last mile connectivity to expand market access of farmers, MSMEs and small businesses. 
  5. It will also provide a strong impetus to the MSME sector in the country through a cost-effective logistics network.
  6.  The policy will ensure standardization in logistics (warehousing, packaging, 3PL players, freight forwarders), creating a National Logistics e-marketplace as a one stop marketplace.
  7. It will involve simplification of documentation for exports/imports and drive transparency through digitization of processes involving Customs, PGAs etc. in regulatory, certification and compliance services.
  8. It will also entail the creation of a data and analytics center to drive transparency and continuous monitoring of key logistics metrics.
  9. It will at the same time, provide an impetus to trade and hence economic growth by driving competitiveness in exports and double employment in the logistics sector by generating additional 10-15 million jobs and focus on enhancing skills in the sector and encouraging gender diversity.
  10. Further, it will lead to the strengthening the warehousing sector in India by improving the quality of storage infrastructure including specialized warehouses across the country and promoting cross regional trade on e-commerce platforms by enabling a seamless flow of goods.
  11. The policy will create a single window logistics e-marketplace – A National Logistics e-marketplace
  12. The policy will be creating a Center of Trade Facilitation and Logistics Excellence (CTFL) and leverage expertise of multilateral agencies. The CTFL will focus on identifying global best practices in logistics, and adapt the same to India’s context.