National Logistics Policy – A game changer to reform India’s logistics sector?

A $160 billion logistics industry in India encompasses 20 government agencies, 40 partner government agencies, 37 export promotional councils, and 10,000 commodities. Add numerous shipping agencies, inland container depots (ICDs), container freight stations (CFSs), IT ecosystems, banks, etc. to this and it makes the entire sector highly decentralized, complicated, and poorly streamlined.

The launch of the National Logistics Policy (NLP) revolved around the reduction of logistics costs from the current 13-14% of the country’s GDP to a single-digit figure. While playing an important role in international trade, logistics also acts as a key pillar in the movement of goods within the country. Logistics costs, accounting for a huge chunk of India’s GDP, significantly stand in the way of the country achieving global competitiveness.

What is the National Logistics Policy (NLP)?

The National Logistics Policy is a comprehensive effort to address the excessive cost and inefficiency of India’s multi-modal and cross-sectoral logistics sector. The policy also addresses multiple aspects like boosting economic growth, generating employment opportunities, lower logistics costs, and more importantly, making Indian products competitive in the global market.

Achieving this vision not only involves a strong, world-class digital infrastructure investment but also robust planning and implementation among the different stakeholders involved. This logistics vision gained a major boost in 2021 when the PM GatiShakti National Master Plan (PMGS – NMP), that provides for seamless multi-modal connectivity infrastructure to various economic zones, was introduced.

What NLP brings to the table?

It’s apparent that NLP aims to bring freight companies, ministries, businesses, intermediaries, and different stakeholders under one roof. But how does NLP achieve this in the complex logistics market? The policy’s success largely depends on the Comprehensive Logistics Action Plan (CLAP) that encapsulates the specific targets of the policy. These steps include: 

• Unified Logistics Interface Platform (ULIP): The Unified Logistics Interface Platform (ULIP) facilitates stakeholders’ seamless access to secure information that is available with various ministries. Currently, the platform includes 30 systems across seven ministries. ULIP ensures smoother cargo movement across the country.

• Integration of Digital Systems (IDS): Seven ministries, including roadways, railways, customs, aviation, foreign trade, and commerce have individual platform dependents and control digital data. IDS integrates all these departments, paving the way for the real-time transfer of data, and hence cargo.

• Ease of Logistics (ELOG): This new digital platform brings together industry associations that can take up issues related to the government’s operations and performance in the logistics sector, ensuring transparency and accessibility.

• System Improvement Groups (SIGs): The System Improvement Group aims to improve communication across ministries. The SIG advises the government on any amendments to existing laws related to the cargo movement across the country.

Why NLP?

NLP is a significant step to normalize last-mile delivery, ensure time and cost effectiveness for manufacturers, prevent product wastage, and eliminate logistics-related challenges.

True to its name, the policy revolves around reforms and initiatives in the country’s logistics sector. According to ICRA (Investment Information and Credit Rating Agency of India Limited), the logistics sector forecasts a CAGR (Compound Annual Growth Rate) of 10.5% between 2022 and 2025. In addition, as per popular estimates, the sector’s worth will scale to $215 billion in the next two years. Seeking an aspiring target of reducing the logistics costs by 8% of the GDP by 2030, NLP has the ability to steer the country towards becoming a global manufacturing powerhouse and revitalize the country’s logistics ecosystem.

What does the future hold for NLP?

NLP is an extensive framework that aims to regulate and revitalize the entire logistics sector of India under its umbrella. The future of NLP largely depends on the success of multiple infrastructure programs, like the Sagarmala that focuses on the waterways, and the Bharatmala that implements road connectivity across the nation. Improving the warehousing capacity across major hubs becomes imperative to sustain traffic.

Final thoughts

Can NLP find its place among successful government initiatives like GST, UPI, E-way bills, or FASTag? The initial approach by the government to transform the logistics ecosystem is appreciable. With geopolitics impacting policies more than ever, will other sectors, including digitization, manufacturing, production, etc., supplement the policy? As of now, the policy’s ambitions and targets are well-laid on paper. Implementing it involves multiple stakeholders mediating and negotiating amicably for the greater good.