Logistics Development Committee Report
The Economic Advisory Council to the Prime Minister constituted a Logistics Development Committee under the Chairmanship of Dr. Bibek Debroy. The committee was tasked to assess key challenges in logistics development and associated commerce and suggest policy reforms for ease of doing trade in India.
- Logistics play a vital role in economic growth. Efficient and cheap logistics is prerequisite to become globally competitive. However India has a high logistics cost which renders Indian Economy less competitive.
- As per the Economic Survey 2017-18, the Indian logistics sector provides livelihood to more than 22 million people and improving the sector will facilitate 10 % decrease in indirect logistics cost leading to the growth of 5 to 8% in exports.
- Survey estimates that the worth of Indian logistics market would be around USD 215 billion in next two years compared to about USD 160 billion currently. However logistics cost in India are 13-14% of GDP which is highly uncompetitive compared to world average of 9%.
- Therefore, the Government is determined to implement more reforms to create a smooth and an efficient environment across the logistics value chain.
- Create an independent department to focus on logistics by overhauling Logistics Division under Ministry of Commerce and Industry
- Reduce rail freight tariff on pilot routes:
- Increase rail modal share (percentage of passengers using type of transportation, in freight transportation, it is measured in mass) through increasing predictability of railways services.
- Construct railway sidings near major airports to improve railways -airways connectivity.
- Shift towards trust-based clearance by using risk management system (RMS).
- Road freight cost per ton per km in India is approximately double than that of US.
Draft National Logistics Policy
In light of the report of the Logistics Development Committee, Draft National Logistics Policy is prepared by the Department of Logistics, Ministry of Commerce and Industry in consultation with the Ministries of Railways, Road Transport and Highways, Shipping and Civil Aviation. There is need that the four Ministries and their departments must leverage existing infrastructure to support each other in the logistics chain which will help in maximizing capacity utilization and reduce costs.
- Aim of the policy is to reduce India’s logistics costs from current 14% of GDP to less than 10% by 2022.
- This policy promises following things which are in tune with making India a 5 trillion $ economy:
- To create a single point of reference for all logistics and trade facilitation matters in India.
- Reduce logistics cost of 13-14% of GDP to 10% as in line with world average.
- Optimize present modal mix (road-60%, rail-31%, water-9%) in line with international benchmarks (road-25-30%, rail-50-55%, water-20-25%).
- Development of multi modal infrastructure
- Create a National Logistics e-marketplace as a one stop marketplace. This single window portal will host various logistics service providers like warehousing service providers, shipping lines, transporters etc and various government agencies involved in regulatory services.
- Simplification of documentation for exports/imports and promote transparency through digitization of processes involving customs and certification.
- Generate additional 10-15 million jobs.
- Improve the quality of storage infrastructure.
Thus, this policy provides a direction to make India globally competitive in logistics cost.
- Identifies the bottlenecks of logistics in India.
- Suggests change in regulatory mechanism of logistics in Ministry.
- Focuses on rail-road connectivity.
- Focuses on railways-airways connectivity.
- Advises government to shift to trust based model from regulatory regime by leveraging technology.