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NATIONAL LOGISTICS POLICY OF INDIA Decoding the National Logistics Policy and its roadmap

Oct 19, 2022

Addressing logistic challenges is essential to ensure a successful manufacturing practice. This means that logistics management needs to have the right number of resources or inputs at the right time, get them to the appropriate location in proper condition, and deliver them to the correct internal or external customer. The Cover Story elaborates on how leading industry players appreciate the new logistics policy framework. A read on…

On September 17, 2022, India’s Union Cabinet approved the National Logistics Policy, which lays down a comprehensive policy framework for the development of India’s $200 billion logistics sector. The policy provides for the seamless integration of multiple modes of transportation by leveraging technology, processes, and skilled manpower, the key to India’s ambitions to become a $5 trillion economy by 2025.


The National Logistics Policy targets to improve the Logistics Performance Index ranking, aiming to be among the top 25 countries by 2030. It also targets to reduce the cost of logistics in India to be comparable with global benchmarks by 2030 and to create a data-driven decision support mechanism for an efficient logistics ecosystem.

What is the National Logistics Policy?

Introduced in 2020, during the Budget speech by Nirmala Sitharaman, Finance Minister, India, the policy, according to the government, is supposed to bridge the efficiency gap by integrating a tech-enabled approach to logistics. The policy aims to reduce logistics costs in the country from the existing levels of 13-14% of GDP, which in turn will contribute to the government’s ease of doing business initiatives.

This comprehensive action plan has proposed several benchmark features and services that enable companies to start adopting better systems and processes.

What are the target areas?

According to several reports, Narendra Modi, Prime Minister, India is expected to touch upon four main steps:

  1. Integration of Digital System (IDS): This system will anticipate integrating 30 different systems of seven different departments, which includes road transport, railway, customs, aviation, foreign trade, and commerce ministries. The digital data from these departments will be integrated under IDS. The aim is to directly and positively affect shorter cargo movement.

  2. Unified Logistics Interface Platform (ULIP): This system will monitor the smooth movement of cargo.

  3. Ease Of Logistics (ELOG): Under this, the new policy will simplify the rules, which is expected to simplify basic business.

  4. System Improvement Group (SIG): This system will be used to monitor all logistics-related projects regularly and will facilitate the removal of any hurdle.

What are the key takeaways?

  • A digital integration of different systems of some departments, such as road transport, railways, aviation, commerce ministries, and foreign trade

  • Shorter and smoother cargo movement and enables the exchange of information confidentially on a real-time basis

  • The national industrial corridor development corporation logistics data bank project has been leveraged

  • The ease of logistics will enable and ensure the ease of the logistics business through transparency and accessibility

  • The system improvement group will monitor all logistics-related projects regularly

Keeping in mind the National Logistics Policy (NLP), we have reached out to some industry experts to understand how this policy helps solve complexities in the logistics sector, thus becoming beneficial for supply chain complexities across the manufacturing industry. Also, we touched upon the new sectors that the Indian leaders think will help improve exports and give a competitive edge in the global market landscape.

NLP is expected to fill in the voids in the supply chain management - Nikhil Agarwal, President, CJ Darcl Logistics

The movement of goods is majorly dependent on three factors, i.e., route connectivity, mode of transport, and distribution channels. Technology and digitisation have always been a matter of concern in the logistics industry, but the newly introduced NLP is expected to fill in those voids in supply chain management.

New routes will innovate in new ways, thus enhancing connectivity, expanding our reachability, and fastening our turnaround time. NLP, with infrastructural development, would generate employment, contributing to the GDP of the country. Manufacturers are majorly facing issues of storage, and technology may help in revealing the exigency and availability of warehouses at desired locations. This need generation will help in supplementing new warehouses at required geographic locations, and old techniques may replace the new ones for the efficient and smooth functioning of the supply chain.

India is currently a major exporter of iron and steel, cotton, gems and jewelry, aluminium products, and automotive. With the new policy coming into place, we are hopeful it will open new avenues for textiles, toys, electronics, and chemicals in the long run. These products, where India has strong manufacturing capabilities, have the potential to improve our export competitiveness in the international market. Mending the loopholes in the supply chain may fix the problems faced by the manufacturers, and exports can be increased exponentially.

Faster turnaround times, optimal capacity utilisation, and lesser idle time for assets are the major benefits - Kunal Subhash Agarwal, Director, KoolEx Cold Chain

It is a great step to try and optimise logistics costs across various supply chains in India. Logistic costs have always been upscaling in India, and the percentage ratio of this cost to the cost of the product being moved is very high, especially with the low cost of bulk goods. The Indian logistics sector is indeed complex given the geographical spread and terrain of our country. Hence, the NLP is aiming to bring all modes of logistics onto a single platform to ideate and pinpoint the factors and obstacles contributing to this complexity and how they can be overcome in the short- and long-term. It will be very beneficial eventually with provisions for faster turnaround times, optimal capacity utilisation, and lesser idle time for assets, and a lot of these issues can go away with public-private government partnerships. Our logistics eco-system is traditionally fragmented, so we will see a lot of consolidation across modes of transport and we will see a lot of logistics-related tech companies emerging. Also, the NLP will facilitate the emergence of transport by water, a sector that has tremendous potential and is the cheapest form of transport.

The policy should focus on wider sustainability/transportation policy and not just logistics - Subhabrata Sengupta, Executive Director, Avalon Consulting

NLP has lofty goals and if it achieves its key objective of making logistics cheaper (reducing logistics costs as a percentage of GDP) and hassle-free, then it will be significantly beneficial for the manufacturing sector. However, at this stage, it is more like a vision document and more details need to emerge to comment on ‘what’ and ‘how’. There are some concerns:

  1. A core part of the NLP is the Unified Logistics Interface Platform (ULIP). It is not clear how it will be developed, and a lot depends on a robust architecture, a smooth UI, and a satisfactory UX.

  2. A lot of the logistics issues remain state-dependent — for example, whether logistics providers can acquire or use land in industrial parks is interpreted differently across states. It is not clear how this policy will co-opt the states and ensure consistent application of rules.

  3. A lot of coordination between various departments and states would still be needed – execution is key.

  4. The lack of competitiveness of multi-modal logistics on many routes is a major issue for the manufacturing industry today. This is driven by issues related to raking availability, lack of vessels in many inland/coastal waterways, transshipment costs (expensive manual/semi-manual unloading and reloading in many cases), delays in transshipment (hubs inadequately connected, narrow roads, inadequate parking for trucks). This cannot be solved by the policy unless it is accompanied by infrastructure investment (often new terminals in uncongested outskirts with a long-term capacity plan) and cooperation from corresponding entities (such as railways).

Note: Some commentators have spoken about the lack of focus on sustainability, but to me, that is a non-issue. As and when sustainable transport becomes viable with the required infrastructure or ecosystem in place, logistics will switch. The industry is highly rational and cost-sensitive. The policy should be a part of a wider sustainability/transportation policy and not just logistics.

Indian manufacturers can expand their footprints globally - Anil Verma, Executive Director and President, Godrej & Boyce

The National Logistics Policy announced on Saturday is a crucial step for efficient supply side management and reducing logistic costs to global standards of about 10%. The NLP will provide a much-needed fillip to export growth, allowing Indian manufacturers to expand their footprints globally. The Gatishakti Vishwavidyalaya will bolster employment opportunities by emphasising skill enhancement across the logistics value chain. Godrej & Boyce's B2B businesses have been built through investment in engineering and manufacturing capabilities and have powered solutions in the fields of renewable energy, power transmission, and industrial infrastructure for 125 years. The impetus given to transportation through new waterways, airports, and multi-modal logistics hubs will provide an effective roadmap to deliver products efficiently and at a very competitive cost across our various global markets.

NLP brings in the technology to unify and help manage complexity - Kami Viswanathan, Senior Vice President – MEISA Operations, FedEx Express

FedEx welcomes the National Logistics Policy. The development of an integrated and efficient logistics ecosystem is a crucial enabler for India to become a $5 trillion economy and improve trade competitiveness. As India looks to modernise infrastructure and supply chains, it’s evident that technology is the key to unifying all involved stakeholders and helping manage complexity better.

We support the government’s vision to make India a more attractive and connected place to do business.

NLP will help to augment warehousing capacity and take products closer to the consumption points - Rampraveen Swaminathan, MD and CEO, Mahindra Logistics

The NLP comes as a big boost for the sector, as it aims to promote the seamless movement of goods across India and potentially could lead to a reduction in the cost of logistics and accelerate GDP growth. It will further have a positive impact on the nation’s supply chain and will help to augment warehousing capacity and take products closer to the consumption points. The enriched focus of the policy on enhancing human capital and operating standards are welcome initiatives to increase formalisation of the sector. As India aims to become a $5 trillion economy by 2024-25. Connectivity and superior infrastructure will be critical to achieving these goals.

We are aligned with the Government’s vision of making India a better and easier place to do business. We remain focused on delivering integrated solutions to help enterprises become more agile and cost-efficient, and support India’s growth story.

The National Logistics Policy can help India achieve its economic growth vision - Deepak Sood, Secretary General, ASSOCHAM

The National Logistics Policy (NLP), is a major structural transformative initiative and will facilitate India's being embedded across global value chains as we move ahead on the path towards Bharat@100. Enabled by different technologies, the NLP focuses on unified measures across different logistics modes, including roads, rail, ports, airports, and warehousing, that will give a decisive edge to the Ease of Doing Business in India (EoDB). Interestingly, NLP was first mentioned in the Union Budget of 2020. A work in progress since it is now a reality that embeds inputs from stakeholders across the spectrum.

What makes the policy so crucial to the logistics sector? To understand the significance of this development, we have to first understand what the industry is all about. Logistics is considered to be the backbone of an economy, which makes up for 14.4% of the country’s Gross Domestic Product (GDP) and impacts all industries, especially agriculture, manufacturing, and services. It also provides employment to more than 22 million people. Everyone across the country and the world felt the magnitude of the impact of this sector during the pandemic.

Ironically, it is also a highly unorganised sector, with 80% of its industries found to be small or medium-sized companies, that the government is trying to rein in and has been taking several measures to improve and regularise. Last year, it introduced the PM GatiShakti National Master Plan (PMGSNMP) to achieve economic transformation and logistics efficiency through seamless multi-modal connectivity, which includes transportation by road, rail, sea, and air. It also facilitates speedier adoption and implementation of digitalisation. The NLP will leverage this work being done under PMGS-NMP to streamline the sector and enhance efficiencies. To spur job creation, it will also focus on skills, which will be made a part of the curriculum or training programmes at various levels.

The policy works on multiple levels for the logistics sector, including plugging the many leaks in the thriving sector. One of the most important is logistics costs, which, the experts' state, is a yardstick to gauge a country’s competitiveness. Currently, the logistics cost of India stands at 14% of GDP vis-à-vis 8%-11% of mature economies like the US, Germany, and Japan. Cutting down on logistics costs will not only increase the country’s exports but also solve the issue of investments across sectors. Integrating local supply chains with global value chains will garner further interest and private investments from international players to select India as a key sourcing market. The boost to foreign trade, especially the country’s exports, will have a ripple effect on private investment.

The NLP helps domestic companies capitalise on not just hard assets through transportation but also soft assets that entail digitisation and documentation. Companies that have already taken advantage of multi-modal connectivity are benefiting from it and can’t wait to implement the policy to increase the efficiency of their logistics. The other attraction is digitisation through United Logistics Interface Platform (ULIP), which brings all modes of transport onto a single platform in terms of visibility to customers.

The policy’s single-window logistics e-market not only unites the sector digitally but will help to eliminate choke points and enhance connectivity across the country, especially in the northeast. This will be made possible with the interlinking of all four modes of transportation to deliver goods and services. It will also help to identify and develop new gateways with ports, some of which have not been used in the past five years. Opening these gateways is necessary to loosen up the bottlenecks, reduce inventory costs, and ensure quick service delivery.

Since logistics measures and policies are largely centered on multi-modal connectivity, the policy is also expected to correct the mix, which has roads accounting for 60% of the total transport, followed by railways at 30% and waterways at around 5%. There is a need to balance the mix and correct it by ensuring that waterways also have the numbers since there is not only a lot of potential in them in the future, but they are also seen as an eco-friendly mode of transport. Shifting the transport concentration from roads to rails and waterways will reduce costs in the logistics sector, power the country's economic growth, and help it achieve its environmental, social, and governance (ESG) goals.

With so much going for NLP, the country is on the right track with this policy and appears poised to achieve its many goals, whether it is a $5-trillion economy or net-zero emission status.

A game-changer in India's infrastructure transformation - Mahendra Shah, Chairman and MD, V-Trans India

The National Logistics Policy is a landmark step in the direction of transforming the industry and bringing competitiveness. It is a much-needed step as reduced logistics costs will help boost in overall efficiency, encouraging value addition and enterprise.

This is a much-needed push with projects such as Bharatmala, DFC, MMLP, and tech platforms like ULIP, eLOGS, and so on. Exciting times are ahead for the industry, and players with a progressive mindset, technological inclination, and competitiveness are surely going to benefit from these developments.

The NLP will help the PM GatiShakti National Master Plan (PMGS-NMP) achieve its target of enhancing multi-modal connectivity. It will build a world-class modern infrastructure by involving all stakeholders in the planning and implementation process, resulting in project efficiency and synergy. This is a significant move as the high logistics costs bring down the competitiveness of domestic goods in the international market. This policy will allow domestic players to compete in the global market and help India become a $5 trillion economy by 2030.

Due to the government's emphasis on capital expenditure over the last eight years, India's logistical efficiency has increased significantly, with room for further improvement. The NLP truly has the potential to be a game-changer in India's infrastructure transformation; the country is sure to benefit from the policy’s comprehensiveness and flexibility in the coming decades.

Image Gallery

  • Nikhil Agarwal

    President

    CJ Darcl Logistics

  • Kunal Subhash Agarwal

    Director

    KoolEx Cold Chain

  • Subhabrata Sengupta

    Executive Director

    Avalon Consulting

  • Anil Verma

    Executive Director and President

    Godrej & Boyce

  • Kami Viswanathan

    Senior Vice President – MEISA Operations

    FedEx Express

  • Rampraveen Swaminathan

    MD and CEO

    Mahindra Logistics

  • Deepak Sood

    Secretary General

    ASSOCHAM

  • Mahendra Shah

    Chairman and MD

    V-Trans India

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