The government has recently laid out plans to enhance the country’s logistics competitiveness and reduce logistics costs substantially. Several new initiatives including the release of the Draft National Logistics Policy are being lauded as game changers for the sector. At a recent conference organised by India Infrastructure on “Container Infrastructure and Bulk Cargo in India”, Anant Swarup, joint secretary, logistics, social media and supply division, Ministry of Commerce and Industry, talked about the current scenario in the logistics sector, experience with customs procedures at ports, key issues and challenges and the new initiatives that are being planned for the next few years. Excerpts…
India has improved its ease of doing business ranking, and is now ranked 100. The most remarkable improvements that have taken place though are on trading across borders, where India has improved from rank 146 to 80. Logistics is another area on which the governemnt has been focusing. Over the past few years, the government has started tracking parameters such as dwell time, customs release time, time being taken by partner government agencies, etc. In order to maintain competitiveness, we have to improve our logistics infrastructure and bring down costs. It is with this intention that the government has created a new division in the Department of Commerce that handles logistics-related functions, both for the creation of new infrastructure and for easing procedural bottlenecks.
The government is also getting third-party audits conducted to assess port dwell time, container and customs release time, and the partner government agency’s release time. Data indicates that custom clearance for exports takes only about 4 hours and 16 minutes to clear consignments and for imports the time taken is slightly more. However, there has been a lot of improvement over time. Earlier, there were a number of issues with respect to the stability of the Indian Customs Electronic commerce Gateway (ICEGATE) but have now been resolved. A new port community system has also been launched by the Ministry of Shipping and has been extended to all the major ports. Minor ports are also being requested to deploy this system. This will result in seamless movement of cargo. Recently, a circular – Turant Customs – was issued as a measure for speedy clearance of goods. With this, customs clearance will become faceless. The other big change in customs procedures includes the creation of a new ICEGATE. With regard to partner government agencies, the ministry is working very closely with the six agencies responsible for 90 per cent of the cargo that gets cleared. These are plant quarantine, animal quarantine and textile communities, drug controller, and the Food Safety and Standards Authority of India (FSSAI). So, a risk management system is being developed, and FSSAI already has a digital platform – the Food Import Clearance System. A similar system is being developed for all other partner government agencies so that systems become smooth and seamless.
Challenges and the way forward
While there is no authentic study on what our logistics costs are, global estimates suggest that the logistics cost in India is 13-14 per cent of GDP. This is very high in contrast to 8.5 per cent in the US and 9 per cent in Germany. Bringing logistics costs down to about 10 per cent is currently the biggest challenge for the industry and the government.
With the aim of bringing down logistics costs, the draft National Logistics Policy had been issued for public consultation and the Logistics Division has received a lot of comments. We are about to seek cabinet approval for the policy. In a bid to aid faster execution of the policy elements, we have developed the National Logistics Action Plan. We are also looking at the supply chains of big commodities that are moved in the country to identify ways of reducing logistics costs. Coal accounts for a share of about 17 per cent in total freight movement, while cement, parcels and containers and foodgrains account for a share of about 7 per cent each. World over, cement is transported in a bulk form while in India it is moved in bags and stored in very old warehouses. We have identified 20 locations where, through the cooperation of Indian Railways (IR) and cement manufacturers, we will build silos to store cement and start moving it in bulk. As per our study, for cement, logistics costs account for 23-25 per cent of the total cost, while the best in the world is 12-15 per cent. Some of the interventions required to reduce this cost are development of bulk terminals, increasing the share of coastal shipping and inland waterways and the upgradation of some of the sidings on IR’s network. If we are able to do this, savings will be in the range of Rs 30 billion-Rs 40 billion per annum. We are also working towards streamlining iron ore and steel movement in the country. Production of 1 tonne of steel requires 3 tonnes of raw materials to be moved. A key intervention on which we are working is creating a network of slurry pipelines instead of moving iron ore by rail. This could potentially lead to savings of about Rs 65 billion per annum.
With regard to fruits and vegetables, in India there is a shortage of 15,000 reefer vans. The logistics costs for apples, tomatoes and bananas is about 22 per cent, 55 per cent and 60 per cent respectively. So, to reduce the costs and increase farmers’ incomes, the Ministry of Commerce has issued the Agriculture Export Policy. Cold chain infrastructure faces challenges of high capex costs and unidirectional traffic. This is hampering our exports of fruits and vegetables. Once a reefer comes to the consumption centre it mostly goes back empty. So, to reduce this cost, the government is talking to some start-ups and requesting them to come up with cost-effective solutions.
A number of initiatives have already been taken. Coal rationalisation has taken place but there is still a lot of coal that moves from coal mines to the railhead by truck. We need to look at whether it can be moved by conveyor belts. This can lead to savings to the tune of Rs 150 billion. Movement of foodgrains is an area which needs big improvements. Notably, the Container Corporation of India has started moving foodgrains through the coastal route from the north to the south. A number of silos have been set up for foodgrain storage and the Food Corporation of India has already floated 26 tenders to curtail wastage on account of inefficient food storage practices followed in the country.
We understand that if logistics costs have to be brought down, we need to bring in multimodality and to promote multimodality, we need to have multimodal logistics parks in the country. We have prepared a draft of the multimodal logistics policy and this will be available in the public domain shortly. Two multimodal logistics parks are already at very advanced stages of development. One is in Jogighopa in Assam and the other is in Bengaluru. The logistics park in Assam will have a river port, land port and railway siding.
The other issue that we are working towards resolving is the high costs and stoppage times of trucks that move within the country. The ministry is looking at the development of a green corridor especially for reefers and farmers’ products to ensure seamless and time-efficient movement of goods. We have started work on this as well. The prime minister’s vision of doubling farmers’ income can be realised essentially through exports and giving farmers the best value for their produce. The government has already developed ENAM – the Electronic National Agriculture Market Place. The system has certain limitations as it works mostly as an information tool. We are working towards the development of a logistics backbone that rides on ENAM to integrate marketplaces. We could have digital connectivity, but unless the challenge with physical connectivity is resolved, it will not resolve the entire problem.
Meanwhile, in order to deal with the challenge of lack of skilled manpower, we are working closely with the Logistics Sector Skill Council where we have developed 33 job roles. These roles have been approved by the Department of Logistics and have now been sent to the Ministry of Skill Development for approval. Slowly and steadily, we will have an ecosystem where there will be centres training people based on an apprenticeship model. We want to create an ecosystem for skill development. We also want the industry to incentivise people with the right skills appropriately to reap long-term benefits.