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Draft National Logistics Policy - I

The Logistics Division in the Department of Commerce has invited comments & suggestions from the stakeholders in the logistics sector & from the public on various aspects of the policy. The last date is Feb. 19, 2019


1 Introduction


1.1 An effective and efficient logistics ecosystem can be a key contributor to robust economic growth in the country, with the potential to facilitate domestic and foreign trade, promote global competitiveness, enhance incomes, drive the ‘Make in India’ initiative and reduce economic disparities across geographies. The 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’ income manifold, which can lead to a domino effect on the overall economy. A reliable, efficient and cost-effective logistics infrastructure for commercial goods is hence critical to India’s continued inclusive and rapid economic growth


1.2 An efficient and reliable logistics network, coupled with a transparent and consistent cross border trade facilitation process, is a key driver of export competitiveness in the country. It acts as an enabler for expanding the foreign markets for indigenous goods. An efficient logistics ecosystem will also encourage investments in the country, especially FDI and will in turn positively impact international trade


1.3 Despite the recognition of logistics being a critical driver of economic development, logistics cost in India, estimated at 13-14 per cent of GDP, is very high (USA 9-10 per cent, Europe 10 per cent, Japan 11 per cent) compared with more efficient global environments, and the sector continues to be highly unorganised. India also has a skewed modal transportation mix, with 60 per cent of freight moving on roads, which is significantly larger than in key developed economies


1.4 Different parts of the logistics value chain currently are being managed by many ministries including Road Transport and Highways, Shipping, Railways, Civil Aviation, D/o Posts, Commerce and Industry, Finance and Home Affairs. In addition, a large number of government agencies, including Central Drug Standard Control Organisation, Food Safety and Standards Authority of India, Plant and Animal Quarantine Certification Service provide relevant trade clearances and impact the value chain


1.5 Globally, leading countries that have achieved efficiency in logistics, like Germany, South Korea, Japan and Malaysia, among others, follow a completely integrated approach towards logistics, and the government provides a coordinated oversight to the entire logistics value chain. In some countries, a Special Committee Chaired by the Prime Minister reviews progress of the National Integrated Logistics Action Plan. In line with the above, there is significant potential for India to integrate and optimize the various elements of its logistics value chain, to ensure seamless, multimodal growth of an efficient logistics sector


1.6 Government of India has also recognised the importance of the sector to propel the future growth of the country and a Logistics Wing has been created consequent to an amendment to the second schedule of the Government of India (Allocation of Business) Rules, 1961, on 7th July 2017, allocating the task of "Integrated development of Logistics sector" to the Department of Commerce and Industry. Some of the activities like cold chains, multimodal logistics parks, etc. in the logistics sector have also been included in the Harmonised Master List of Infrastructure sub-sectors and has been granted infrastructure status in November 2017 which will enable the sector to avail infrastructure lending at easier terms with enhanced limits, access to larger volume of funds as External Commercial Borrowings (ECB) and access to longer tenure funds from insurance companies


1.7 In the above context, the primary aim of the National Logistics Policy 2018, is to enable integrated development of the logistics sector in the country. It aims to inform, clarify, strengthen and prioritise the key objectives, focus areas and the governance framework for Logistics in India. It also clarifies the role of the various stakeholders, including Central Ministries, state governments and other key regulatory bodies


2 Vision and Objectives for Logistics in India


2.1 To drive economic growth and trade competitiveness of the country through a truly integrated, seamless, efficient, reliable and cost-effective logistics network, leveraging best in class technology, processes and skilled manpower


2.2 Key objectives of the national logistics policy: Given the pivotal role of the logistics sector in the development of the economy and the need to incorporate learnings from global best practices, the policy outlines an ambitious set of objectives. The following are some of the key objectives for logistics in India, to be achieved in the next five years:


2.2.1 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


2.2.2 Driving logistics cost as a percentate of GDP down from estimated current levels of 13-14 per cent to 10 per cent in line with best-in-class global standards and incentivise the sector to become more efficient by promoting integrated development of logistics Optimising the current modal mix (road-60 per cent, rail-31 per cent, water-9 per cent) in line with international benchmarks (25-30 per cent share of road, 50-55 per cent share of railways, 20-25 per cent share of waterways) and promote development of multimodal infrastructure Improving first mile and last mile connectivity to expand market access of farmers, MSMEs and small businesses Enhancing efficiency across the logistics value chain through increased digitization and technology adoption Ensuring standardisation in logistics (warehousing, packaging, 3PL players, freight forwarders)


2.2.3 Creating a National Logistics e-marketplace as a one stop marketplace. 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


2.2.4 Creating a data and analytics center to drive transparency and continuous monitoring of key logistics metrics


1 USA : 10 per cent, Germany : 9 per cent


2 USA : (37:48:15)


2.2.5 Encouraging industry, academia and government to come together to create a logistics Center of Excellence, and drive innovation in the logistic sector


2.2.6 Creating and managing on an ongoing basis, an Integrated National Logistics Action Plan which will serve as a master plan for all logistics related development. Also, there will be support for states for development of respective state logistics plans aligned with the national and state priorities. An annual execution plan to continuously monitor progress against the set objectives will also be created


2.2.7 Providing an impetus to trade and hence economic growth by driving competitiveness in exports


2.2.8 Doubling employment in the logistics sector by generating additional 10-15 million jobs and focus on enhancing skills in the sector and encouraging gender diversity


2.2.9 Improve India’s ranking in the Logistics Performance Index to between 25 to 30


2.2.10 Strengthening the warehousing sector in India by improving the quality of storage infrastructure, including specialised warehouses across the country


2.2.11 Reducing losses due to agri-wastage to less than 5 per cent through effective agri-logistics involving access to cold chain, packaging and other post-harvest management techniques and thereby enhance agriculture price realization and farmer income


2.2.12 Providing impetus to MSME sector in the country through a cost-effective logistics network


2.2.13 Promoting cross regional trade on e-commerce platforms by enabling a seamless flow of goods


2.2.14 Encouraging adoption of green logistics in the country


3 On a current base of 20 million


4 Till wholesale markets


3 Policy thrust areas


This policy defines the key thrust areas for logistics in India, which will be the focus of the relevant Ministries as well as act as a guidance to the state governments. The prioritised focus areas for logistics are detailed below:


3.1 Focusing on critical projects to drive an optimal modal mix and to enable first mile and last mile connectivity


3.1.1 Driving first mile and last mile connectivity and optimising the current modal mix through operational research are two key focus areas for logistics in India. It is therefore critical to identify projects for driving the same, and to coordinate across the relevant Central Ministries and state governments to drive their implementation. Wherever required, Viability Gap Funding may also be provided to respective state governments to expedite select projects


3.1.2 The Logistics Wing will be the nodal agency tasked to identify key projects for driving first mile and last mile connectivity and to optimise the modal mix through operational research to identify commodity and the corridor for the most cost effective mode of transport. Expedited clearances will be facilitated for infrastructure projects, for example, MoEF provides single window environmental clearance through "PARIVESH" platform. It will also identify key corridors which can be developed as ‘Model Logistics’ corridors connecting major clusters. Certain projects for development of logistics in heavy mining regions and oil pipeline infrastructure can be classified as critical projects.


3.2 Driving development of Multi Modal Logistics Parks (MMLPs)


3.2.1 At present, there is a gap in the availability of MMLP infrastructure for enabling seamless multimodal freight transfer, providing world class storage and handling as well as delivering value added freight services. Even where ICDs’ and CFSs’ have been created, there is potential to improve their utilisation and performance


3.2.2 Different stakeholders in the country, including MoRTH, CONCOR, DMICDC, state governments, etc. are independently planning the development of MMLPs. There is a need to ensure that these MMLPs are developed at the right locations with appropriate value added services, mechanisation, technology adoption etc. for effectively driving the logistics efficiency in the country and ensuring duplication of facilities at the same location is minimised


3.2.3 An integrated policy will be defined for the development of MMLP in the country. Also a Multi Modal Logistics Park Authority (MMLPA) would be set up with representation from various Central Ministries (Rail, Road, Shipping, Civil Aviation, Customs, etc.) as well as respective state governments. The Commerce Secretary will chair this Authority. MMLPA will identify the right locations for setting up of MMLP, facilitate single window for all administrative approvals and monitor the development and performance of MMLPs in consultation with all the relevant stakeholders. It may on select basis also provide Viability Gap Funding to MMLP projects


3.3 Driving interventions to reduce logistics cost and promote logistics efficiency for movement of key commodities


3.3.1 A critical aspect of driving down logistics cost is to identify commodity specific interventions. Of the commodities contributing to significant freight movement in India such as coal, iron ore, steel, cement, foodgrains, fruits and vegetables, etc., most are distributed into regional clusters of supply and/or demand. It is important to evaluate the key drivers of logistics costs at each commodity level, across the key origin and destination pairs, and identify levers to reduce these costs by undertaking operational research, benchmarking of global best practices and discussions with relevant stakeholders. Also, minerals of national importance, such as rare earths will be studied for improving logistics effectiveness and responsiveness of supply chains. Similarly, safe handling of chemical and petrochemical products and waste and sustainable reverse logistics will be a key area of focus. The Logistics Wing will drive the same in coordination with the relevant government and industry stakeholders.


3.3.2 A key focus area to reduce the logistics costs for the key commodities is to facilitate modal shift for the long haul from road to rail, coastal shipping, inland waterways, etc. It is critical to identify the average lead distance beyond which this modal shift should occur for the respective commodities. Alternate modes which are more economical will be identified and encouraged. For example, for iron ore the most economical mode of transport up to 400-500 km is slurry pipeline, beyond 400 km up to 1,100-1,200 km is rail, and beyond 1,100 km is coastal shipping. Where feasible beyond 300-400 km, inland waterways are more economical. The aim is to promote cheaper alternate modes. This will also aid in addressing the environmental concerns associated with road transportation. RORO on flat rail wagons in challenging terrains will also be explored for cost savings and reduced environmental impact.


3.3.3 It is critical to identify the key OD pairs where movement of goods can be facilitated through coastal shipping and inland waterways for each commodity. Subsequently focus will be placed on identifying and implementing key infrastructure interventions in coordination with the relevant Ministry (for example, handling infrastructure for the specific commodity at the respective port)


3.3.4 The Logistics Wing will work with the respective Ministries for identification and development of terminals/logistics parks next to specific rail sidings to optimise freight movement for key commodities. This would result in reduction of first mile and last mile costs, drastically bringing down the logistics cost. For example, the US cement industry is organised in 350+ railway integrated terminals which provide storage and handling infrastructure for bag and bulk cement and also provide value added services like blending. In India as well, focus would be on building bulk terminals in 8-10 large institutional demand centres and bag handling terminals at additional 10-12 strategic locations. The Logistics Wing will coordinate with the Ministry of Railways for development of such mechanised, integrated railway terminals for key commodities at identified locations


3.3.5 Focus will be given to perishable commodities given the specialised nature of requirements for their packaging, transportation and storage. India is the second largest producer of fruits and vegetables in the world with fruit production of 92 MT and vegetable production of 178 MT. The wastage in fruits is around 25-30 per cent, mainly driven by the limited availability of cold chain infrastructure at the right locations. The Logistics Wing will work with the Ministry of Food Processing Industries, Ministry of Consumer Affairs, Food & Public Distribution and the Departments of Horticulture in respective states to identify key policy interventions and infrastructure enhancement to promote penetration of cold chain facilities and adoption of reefer trucks in strategic locations. Focus will also be to encourage start-ups working in the ‘farm to plate’ space


3.4 Creating a single window logistics e-marketplace


3.4.1 The logistic sector in India is unorganized and fragmented with a large number of stakeholders both private and public, small and large. These stakeholders have their own set of processes and systems. A large number of transactions are still happening manually and even where online systems exist, they do not communicate with each other. The details about number of certifications required and various agencies responsible for providing them is not available at one place. Also there is limited visibility on the capacity and availability of logistics infrastructure, e.g., warehouses capacity. This informational asymmetry results in increased transactional costs


3.4.2 A National Logistics e-marketplace will be setup by the Logistics Wing, as a one stop marketplace. It will be a single window transactional platform. This single window portal will onboard various logistics service providers like transporters, warehousing providers, shipping lines, 3rd party service providers, freight forwarders, Customs brokers, etc. and various government agencies, including Customs, Partner Government Agencies (PGAs), etc. involved in regulatory, certification and compliance services. The portal will involve simplification of documentation for all exports/imports. Information will be captured at one place which will be used by all regulatory agencies, thereby the need for documents to be submitted at multiple places will be discontinued and will enable the entire regulation system to be digitised. This will bring in greater transparency and faster clearances, thereby reducing logistics costs and making exports competitive, thus improving trade and bolstering economic growth. The portal will also enable improved price discovery, route optimisation, in-transit tracking, and timely delivery assurance and also provide seamless statutory clearances and certifications from state government authorities, EPCs, Customs, PGAs, etc. The proposed portal shall be developed keeping in view the advancements in technologies like block chain, internet of things, etc.


3.5 Setting up a Logistics Data and Analytics Centre


3.5.1 Currently, there is no single place/portal in the country that tracks and reports metrics across the logistics value chain. Thus, there is significant scope for consolidating, standardizing and driving consistency in data reporting and analytics in the logistics sector


3.5.2 A logistics data and analytics centre will be set up by the Logistics Wing. The hub will serve as a single source of data for relevant performance metrics across the logistics value chain and will enable data driven decision-making for future infrastructure projects. Performance dashboards will be defined for key logistics metrics across various Central Ministries as well as for respective state governments. A diverse set of data sources comprising of telematics, remote sensing and track and trace data will be incorporated in the same.


3.5.3 The data from the hub will be used to facilitate review of logistics performance metrics. This will be done on a quarterly basis by an inter-ministerial committee, chaired by the Minister for Commerce and Industry. On a half yearly basis, a review will be conducted by the National Council for Logistics, chaired by the Prime Minister


3.6 Creating a Centre of Trade facilitation and Logistics excellence (CTFL) and leveraging expertise of multilateral agencies


3.6.1 The policy aims to encourage partnership between government, private players and academia to drive innovation in the logistics sector through structured programs


3.6.2 A ‘Centre for Trade Facilitation and Logistics Excellence’ (CTFL) will be created in partnership with the Indian Institute of Foreign Trade (IIFT), New Delhi. CTFL will bring together key stakeholders (relevant Central Ministries—Roads, Rail, Shipping, Civil Aviation and Customs, PGAs and relevant state governments), private players, industry associations and academia


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