Over the past few years, the Ministry of Road Transport and Highways (MoRTH) and the National Highways Authority of India (NHAI) have embarked on a journey to enhance the country’s infrastructure. With this aim, the government has initiated the development of 35 multimodal logistics parks (MMLPs) to strengthen the country’s logistics infrastructure. At a recent roundtable organised by India Infrastructure Forum, Prakash Gaur, chief executive officer, National Highways Logistics Management Limited, discussed the evolving role of MMLPs, the current status and future prospects. Excerpts…
MMLP status update
The MMLPs in Jogighopa, Nagpur, Chennai, Bengaluru, Indore and Jalna have been awarded. Additionally, bids are currently live for the MMLPs in Anantapur, Pune and Nashik. About six to seven more MMLPs are being planned to be awarded during 2024-25 in locations such as Coimbatore, Patna, Jammu, Hyderabad, Jaipur, Vishakhapatnam and Mumbai. The MMLP projects serve as examples of proactive efforts to address logistical challenges and improve connectivity. Therefore, it is crucial to align logistics facilities, customs services and warehouses to create MMLPs and streamline supply chains.
Enhancing logistics efficiency
In 2017, India’s logistics performance index (LPI) rank was 43rd globally and currently, it ranks 38th, with a score of 3.4. An improvement of one point in the LPI score results in an increase in the country’s trade by approximately 16 per cent. India has tremendous potential to further improve its logistics efficiency. The six core competencies used to measure the LPI include customs performance, infrastructure quality, consignment tracking and tracing, ease of arranging shipments, logistics service quality and timeliness of shipments.
Currently, the focus is on collaborating the efforts of all 16 ministries, including MoRTH and Dedicated Freight Corridor Corporation of India Limited (DFCCIL), to improve infrastructure projects. Additionally, it is important to establish efficient transportation links for the final stretch of delivery, covering distances of 5-10 km, to connect with major transportation arteries such as highways, expressways, and water routes. These critical routes enhance the overall efficiency and highlight the significance of a robust logistics infrastructure around ports to streamline the movement of goods and services. Strategic planning has also assumed importance in accommodating densely populated regions. Moreover, the 45-year-long concession period for MMLPs allows developers and stakeholders to adapt to changing needs and circumstances over time.
A key recommendation is the adoption of a consortium-based approach for infrastructure development by fostering partnerships between government entities, private players and industry stakeholders. Creating a collaborative ecosystem is crucial for ensuring rapid progress and promoting innovation. Additionally, the vision for the future of logistics infrastructure hinges on the adoption of flexible concession models that incentivise private investment while ensuring accountability and efficiency. There is a need to strike a delicate balance between incentivising innovation and safeguarding public interest through phased development periods and stringent performance metrics. Meanwhile, a focus on adaptability and responsiveness underscores the need for dynamic policy frameworks tailored to the evolving needs of the sector.
Future prospects
The government’s objective is to build good infrastructure and get the right bidding value, reduce logistics costs, and efficiently develop services in a highly competitive market. It is, therefore, essential for bidders to be competitive in design and costing. Meeting key performance indicators (KPIs) while granting developers flexibility in project execution is important. Additionally, KPIs have been mentioned in the concession agreement. Once the KPIs have been defined, monitoring becomes essential while delivering services such as handling or storage. These models advocate phased development schedules and rigorous performance evaluations to strike a balance between stimulating innovation and ensuring public interest protection.
The concept of MMLPs is evolving in India. From an economies of scale perspective, it is important to prioritise business operations as the complete value of the product is derived in the supply chain.
Value addition within the supply chain is important because focusing solely on the transfer and handling of goods, as seen in most MMLPs, is not enough to create a robust business model. To thrive in the logistics sector, it is important to consider the entire value chain.
Additionally, there is a provision for laboratory offsets, which further enriches the developmental landscape. All the documents on public-private partnership (PPP) and design-build-finance-operate-transfer (DBFOT) modes are being updated by MoRTH, especially for the highway sector. Under the exclusivity clause, the estimated development period of 10-15 years is expected to be sufficient for players to establish themselves in the market. Establishing or even developing a facility by any private player would be challenging in the upcoming market.
At the Gati Shakti level, winning bids for any project with a cost exceeding Rs 5 billion are extremely challenging, requiring a rigorous review process to identify any project duplication. The analysis goes deep into project competitiveness, with ongoing efforts to improve existing documents. Additionally, it is imperative to acknowledge that the MMLP is multimodal and hence relies on railways.
In terms of investment regulations, a significant portion, equivalent to one-third of the total investment, must be realised within the first two years to effectively operationalise the project. Subsequent phases are also outlined, with phase two scheduled to begin within 10 years, followed by phase three within another 15 years. Additionally, collaborative partnerships with commercial entities are introduced, emphasising revenue-sharing arrangements that are contingent upon project success. The bidding process is inclusive, allowing participation from a diverse range of entities, including consultants, bankers and funds. This inclusive approach aims to promote innovation and efficiency in the development landscape. Meanwhile, it is crucial to emphasise the importance of fair competition, transparent regulatory frameworks, and protecting investor interest for fostering a dynamic logistics ecosystem. Harmonising market dynamics with regulatory safeguards is essential, and this can be achieved through the implementation of exclusive clauses and regulatory oversight.
Conclusion
The roadmap for revolutionising India’s logistics sector emphasises collaboration, innovation, and regulatory clarity to foster sustainable growth. Flexible concession models, another key focus area, resonate deeply with the evolving needs of the economy. Implementing these measures can unlock the full potential of the country’s logistics sector, positioning it competitively on the global stage. The vision transcends mere theoretical propositions, offering actionable steps that can reshape the landscape of logistics infrastructure and serve as a guiding light for policymakers, industry stakeholders and investors interested in the transformative impact of logistics on India’s economic trajectory.
