Dr Manoj S. Kamat presents an analysis of the National Logistics Policy and what it means for India and Goa
The recently announced National Logistics Policy (NLP) 2022 looks great due to its extensive attempt to address cost and inefficiency in our evolving logistics ecosystem.
Background of the NLP 2022
The reference to bringing in logistic policy was first made in 2020 by Finance Minister, Nirmala Sitharaman in her address regarding the budget. As a precursor to the NLP, in the past 5 years, India has pumped in nearly `15 lakh crores to improve roads, rail, ports and airports’ critical infrastructure for logistics. Digitisation has also been at a fast pace.
The NLP Goals
The NLP 2022’s primary goal is to encourage the free flow of commodities and raise the competitiveness of the sector throughout the country. The NLP aims to cut costs, make cargo movement seamless, and institute an overarching policy to achieve this grand objective. Further, the objective is to move more cargo by train and water. The main thrust is to create a digital platform to get everyone together, including freight companies, ministries, and businesses. The aim is to bring all agencies to one place, in real-time, just like a one-stop shop for everything logistics.
The NLP -Action Plan
The NLP can be simplified to feature 6 vital elements, the IDS, the ULIP for data integration, the ELOG for procedural simplification, and the SIG for ease in facilitation, infrastructure augmentation, and capacity development.
Integration of the Digital System
Under the Integration of the Digital System (IDS), 30 different systems of seven different departments will be integrated, including road transport, railway, customs, aviation, foreign trade, and commerce ministries. Since all these departments will have their digital data which will be integrated under IDS it will shorten cargo transit time and enable real-time information to all stakeholders.
Ease of Logistics
Under the Ease of Logistics (ELOG), the NLP aims to simplify the rules and the logistics business will be eased. This will streamline the regulations and make the logistics industry perform efficiently while the System Improvement Group (SIG) will be used to monitor all logistics-related projects regularly and will facilitate the removal of any hurdle.
System Improvement Group
The SIG will include members from different departments to assist in the periodic assessment of all logistics-related projects to remove coordination barriers. The committee will also come up with solutions to resolve user issues and create a plan of action to formalise the unorganised cargo segment in the logistics industry. The SIG is also mandated to carry out the annual Logistics Ease Across Different States (LEADS) performance index of states in India to help state governments improve their performance.
The NLP plans to set up massive logistic parks with warehousing facilities and effective distribution all under one roof. The policy also looks at developing benchmarking service standards, and standardisation of physical assets among others. It could help people quickly track spare capacity in warehouses, store their products, when needed and then move them using readily available transport.
Additionally, the policy aims at capacity development with an emphasis on human resources for future industry requirements. The logistics policy thus contemplates bringing all stakeholders under one roof, bringing transparency in the system through information sharing, fixing responsibilities in the state through the creation of nodal points, and, facilitating benchmarking with international best practices.
How will NLP be the game-changer?
The NLP 2022 certainly can enhance the growth potential of the Indian logistics industry, which currently holds a pigmy position compared to the global business.
Indian Logistics Market
It was estimated that the Indian Logistics Market would grow to US$ 380 billion in 2025, at a compound annual growth rate between 10 to 12% implying a big business opportunity in India.
India currently heads the tail of logistic efficiency, and the NLP 2022 can be a great game changer. According to the World Bank Logistics Index of 2018, Germany is ranked No. 1 while India is ranked 44th far behind countries like the United States and China which are at the 14th and 26th positions, respectively.
The business structure of this industry is also extremely complicated with a lot of other intermediaries in between. India’s logistics industry has within its fold over 200 shipping agencies, 36 logistics services, 129 Inland Container Depots (ICD), 168 Container Freight Stations (CFS), 50 IT ecosystems, banks and insurance agencies. Moreover, the logistics sector involves more than 20 government agencies, 40 Partner Government Agencies (PGA), 37 export promotion councils, 500 certifications, and over 10,000 commodities.
According to the Ministry of Commerce, Government of India the country spends around 14% of its GDP on logistics costs compared to the BRICS average of 11%. Relatively, countries like Germany and Japan are known for their developed logistics infrastructure and systems and spend just around 8 to 9% of their GDP on logistics costs indicating the miles India has to cover in improving its logistic efficiency, allowing for value addition and business.
The NLP 2022 looks at cost-improving the sector by facilitating a 10% decrease in indirect logistics costs to enable the growth of 5 to 8% in exports.
High logistics costs and delays in India also act as an impediment and bring down the competitiveness of domestic goods in the global market. In the absence of elements of process re-engineering in the industry, complete digitisation, and infrastructure for multi-modal transport, revitalising the Indian logistic sector was hugely difficult.
Support to MSMEs
The NLP represents a significant advancement for the nation’s logistics business according to the stakeholders in the logistics sector. The industry is satisfied that the policy has been formulated after extensive consultation with the stakeholders and concerned ministries, to their satisfaction. he NLP will support in enhancing the competitiveness of MSMEs, and other sectors such as agriculture and allied sectors, fast-moving consumer goods and electronics.
NLP Implementation on a fast-track
The launch of the NLP got a deserving welcome for it lays down a cross-sectoral, multi-jurisdictional and comprehensive framework for India’s logistics sector. The NLP announced by the Prime Minister on 17th September 2022, received priority cabinet approval on 21st September, within 4 days of its announcement; indicating the seriousness of the Centre to implement it.
The Logistics Indicators for Goa
It is expected that the centre will intensify its urge with all the States to bring out their policies and be in sync to achieve the core target of improving India’s overall Logistics Performance Index (LPI).
A detailed assessment of LEADS survey results in the context of Goa will help us evaluate the enablers and impediments to Goa’s logistics ecosystem. Such assessment will also help us to review where Goa stands as of today in terms of expected outcomes across the value chain including shippers, terminal infrastructure, logistics service providers, transporters and readiness of our regulatory mechanisms.
Goa’s rank is 18th among the 21 States surveyed, just above the last 3 states on the list that includes Bihar, Himachal Pradesh, and Assam. Goa scored as low as 2.84 in 2021, relative to 2.77 for Bihar, 2.75 for Himachal and 2.63 for Assam, the least performer among 21 States.
Where does Goa lag in Logistics?
As per LEADS 2021, Goa for its logistics sector has pathetic availability and quality of infrastructure especially road, rail, and terminal facilities. Further, the performance concerning logistics ease, the implementation of Trade Infrastructure for Export Scheme (TIES) outlays and the ranged scale of Ease of Doing Business (EoDB) ranks also are poor. Based on the perception indicators Goa stands low on the registered count of safety and security at terminals, internet connectivity, and the capability of logistic service providers. The road freight rates and prices of terminal services are found to be unreasonably high.
Goa’s lacklustre performance in logistics as of now strongly underlines the need for a renewed attempt to create robustness of infrastructure and regulations. In that sense, Goa is still not ready to push the needed reforms forward needed to unveil the policy.
What does Goa need to do for the Logistics sector?
Before we set the Goa State Logistics Policy and Goa State Logistics Master Plan rolling, the following things need to be set right:
Implementation of Export Strategy
The Export Strategy of Goa 2018 document prepared by the Federation of Import Export Organisation (FIEO) for the State needs to be timely implemented in letter and spirit. The creation of the trade-enabling infrastructure envisaged by the above document will greatly help in exploring the fullest potential of the incoming policy for the State.
Secondly, the logistic mapping of Goa highlights the absence of cold chains, food parks, APEDA and MPEDA-approved labs and pack houses in the State, and this needs to be put in place. Thirdly we need to consider that the time and cost for cargo offload, and to be connected to transit locations are enormous in Goa.
Strengthen Existing Logistics Blocks
Of top priority in addition to granting industry status to the logistics sector are the efforts needed to make more arrangements for the movement of cargo container movement via road by using the Balli-Cuncolim Park as the Inland Container Depot (ICD). This will cut travel time between JNPT Mumbai and Goa. Efforts are also needed to augment the palletisation facility for use of Goa’s pharma industry at the airport. Optimal connection of Mopa airport by rail to Konkan railways and complete utilisation of the ICD at Verna-IDC presently managed by the Central Warehousing Corporation for augmenting warehousing facilities.
Improve Road Network
In the context of infrastructure augmentation, there is also an urgent need for the 4-laning of the Canacona bypass, Khandepar bridge, Margao bypass, from Karaswada-Bambolim, and Farmagudi-Vasco. Goa has to work on a war footing to make corrections to the bad stretch Kochi-Mangalore-Goa and all roads leading from Hubli and Karwar to Goa, especially the stretch between Ramnagar-Anmod, and Canacona-Cuncolim. Most importantly, the development of human skills needed for the growth of this sector needs a strategy.
To our advantage and to make our processes faster, Goa has already put in place the single-window mechanism for hassle-free processing of approvals for setting-up logistics facilities.
On the regulatory front, there is a need for adequate access to Indian Customs EDI Gateway (ICEGATE) service centres for freight forwarders from Goa and to facilitate ease of documentation of Customs levies for exporters/importers.
Amending Goa IDC Act
The Goa IDC should amend its plot lease allotment, sub-lease and transfer regulations to permit warehousing activities in its industrial estates. The state government needs to amend the Goa Industrial Development Corporation (GIDC) Act.
With the announcement to start the coastal feeder service between Goa’s MPT and Mumbai’s Jawaharlal Nehru Port Trust, the possibility of operating a roll-on-roll-off (RoRo) service ferrying trucks between the two ports, just like the facility offered by the Konkan Railway via rail could also be explored.
The ensuing logistics policy of Goa must entail a provision for a multi-modal logistics park by incentivising private players to set up logistics infrastructure.
Some fiscal and legislative incentivisation to Goa’s Barge industry must be tapped with the active intervention from the centre to best use its skills and physical assets.
Conclusion: It is good to hear that Goa is looking at logistics as the sunrise sector when several states such as Odisha, Rajasthan, Tamil Nadu, Kerala among others are yet to firm up their own policy.
The new airport at Mopa will also give a big boost to logistics and exports once completed. With the commissioning of the new airport at Mopa, it is slated to be one of the 15 hubs along the Trans-Atlantic, Mediterranean, and Trans-Pacific flight paths, and will redefine the contours of the logistics industry in Goa. The fully integrated logistics section to handle perishable as also general goods at Mopa airport will enable Goa’s pharma, electronic assembly, marine, and agricultural products to find suitable export markets from Goa to Middle East and Europe.
The Goa Investment Promotion and Facilitation Board (Goa IPB) has notified a private land spanning 1.3 lakh sqm at Dharbandora as an investment region and facilitated the establishment of a private logistics park in the area promoted by the Goa’s noted CMM Group. This novel initiative will kick start the much-needed private investments in the sector.
Also laudable are the efforts of private players like Chowgule Shipyard in Goa and Mumbai-based Shreyas Shipping for the introduction of feeder service which would help the state in saving on time for transporting and also help in cutting down transportation costs.
With a forward-looking logistics policy, Goa could exploit the potential to emerge as a logistics hub in Western India. Such a hub would cater not only to Goa but also to large parts of Southern Maharashtra and Northern Karnataka. The increased volume of traffic has opportunities in all facets of logistics including transportation, warehousing, freight forwarding, express cargo delivery, container, and shipping services, which will largely benefit all stakeholders in the State. It is hoped that policymakers in Goa will pay attention to the precursors before the Goa State Logistics Policy is announced.
Dr Manoj S. Kamat is PhD (Finance) IIT Bombay, and a Post Doc. Fellow in Economic Policy, the writer is currently a Professor & Principal of Shree Mallikarjun & Shri Chetan Manju Desai College at Canacona. He is also a popular columnist and policy commentator. He can be reached at firstname.lastname@example.org, 0-9422415010