FinFloww

FinFloww

23-09-2022

13:08

PM Modi just launched a scheme that is the next big thing after UPI It is going to revolutionize the logistics of India, just like UPI revolutionized payments Here’s how it will help India become a $5 trillion economy:

Any country's economic state can be directly correlated to it's infrastructural development. So, on 15th August last year, India announced to launch a Rs.100 lakh crore national infrastructure plan. Surely, India is looking to fire it's economy on all cylinders.

So pumping in so much money makes sense!! You see, good infrastructure promotes more manufacturing. Now, China has been “the world's factory" for quite a while. In-fact, in 2019, it's exports equaled $2.5 trillion! — Almost equal to India's last year GDP.

But the Covid-hit supply chain, stricter environmental laws and the increase in import tariffs by the U.S have worn out the world factory. And brought the spotlight on India. India realised this, and came up with a tech enabled masterplan — National Logistics Policy (NLP).

As the name suggests, this policy has been introduced to revamp, digitize and revolutionize logistics. You see, logistics includes facilities that are crucial to trade. It involves transport services, storage facilities and government services like licensing and customs.

And the more seamless the movement of goods within the country, the more boost in the trading sector. According to a study, logistical costs in India account for about 13-14% of GDP. Which is almost the double of what it costs in developed nations.

Logistics in India comes bundled with bureaucracy and red-taping. As a matter of fact, there are around 20 government agencies, 40 government partner agencies overlooking this sector. And we all know how messy it can get in streamlining co-ordination between these groups.

Something had to be done to connect all these agencies under one umbrella and provide a common interface. Sounds familiar? Yep, it’s the UPI moment of logistics. And unsurprisingly, this part of NLP is known as ULIP (Unified Logistics Interface Platform).

ULIP aims to bring all digital services related to transport under one single portal. This will free the manufacturers and exporters from all the tedious processes. Be it getting licenses, or paper clearances, they won’t need to go back and forth knocking doors.

Just submit the papers on the portal, and get the work done. But breaking the long bureaucratic cycle is not the only win. You see, the portal would provide real-time data as well. One can easily track the current consignment, for each and every step.

This would facilitate shorter, more accurate delivery periods and also maximum utilization of freight vehicles. Let us explain. You see, movement of goods need not be through just one mode of transport. It can be multi-modal.

It means that it can be carried through different modes of transport like road, rail, air, etc. And moving goods through these different modes often leads to delay in the final shipment delivery. Primarily because of miscommunication between different agencies.

And this often increases the logistics costs. With the real-time data available, all the involved parties would know the exact state of the consignment. Additionally, they can also identify if any freight vehicle is going back-empty or not at full capacity.

This can help ensure that every transport is being utilized fully at all times and reduce the losses incurred. In-short, ULIP will act as the one-stop shop for logistics. NLP also mentions an E-Log service (Ease of Logistics).

This will typically help the exporters and manufacturers to resolve operational issues by directly reaching out to the government. The government also has plans for building logistics parks in the NLP which would provide warehousing facilities and multi-modal connectivity.

Anyone can use the warehouse for storage purpose as and when available and use it for distribution as and when required. All that sounds so neat and organized, doesn't it? But unfortunately, that alone won't downsize the logistics cost.

This policy focuses on collaboration and data-driven decision making. But none of this would be useful if the infrastructure for transport isn't upto the mark. In 2015, the Bharatmala project was announced which envisions building highways covering approx 83000 km of land!

The plan was to complete this project by FY 2022. But till date, only 23 percent has been completed. The deadline has been extended by 6 years and the project cost has increased by almost 100%.

Land acquisition issues, pandemic driven delays, higher cost of raw materials have all contributed to this. That and of course, poor communication b/w the states and central govt. Without proper connectivity and better roads, bringing down logistics cost is not possible.

Extremely slow freight trains and under-developed ports add more strain on road transport. Which is by the way, the costliest mode of transport. Primarily because one cannot transport a huge quantity at one time.

So yeah, the NLP looks good and will probably resolve a lot of bystanding issues, but it is just the one side of the coin. There's a lot more work to do before NLP can reach its full potential.

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