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Published on: Oct. 8, 2022, 6:10 p.m.
NLP: Setting a new direction
  • Modi unveiling the NLP: gathering speed like cheetahs?

By Ritwik Sinha. Consulting Editor, Business India

The symbolism was not lost on anyone. On the occasion of his 72nd birthday on 17 September, the Prime Minister, Narendra Modi released five cheetahs brought from Namibia, at the Kuno National Park in Madhya Pradesh. And in the evening of the same day, at Delhi’s Vigyan Bhawan, he unveiled the National Logistics Policy (NLP) which finally became a reality three years after the draft policy was released in consultation with various stakeholders. “There is some relevance between the release of cheetahs in the morning and the launch of the National Logistics Policy in the evening. We want movement of goods from one place to another with the speed of the cheetah. The country wants to move forward at the same speed,” he said.

Logistics and supply chain have a pervasive presence in all business operations (from raw materials procurement to final delivery of finished goods to the target end consumers – industrial, wholesalers, retailers, actual customers). They create a broad and robust ecosystem for adding efficiency to basic transportation and the storage and distribution of goods.

This has become a permanent basis for discussion, all the more so in recent decades as India’s economic profile significantly improved since the launch of reforms in the early 90s. Even hard-nosed critics will find it difficult to dispute the fact that India made substantial gains in the manufacturing and industrial sectors or that consumer facing businesses like retail have grown at breakneck speed, especially in the last few decades. 

In fact, India has just pipped Britain to become the fifth largest economy. Reaching this milestone (from it being left with two months forex reserves in 1991 leading to the commencement of reforms) resulted in modest to massive expansion in almost all business spheres, while new verticals have also emerged.

Needless to say, logistics operations, as defined by the mammoth transportation fleet size, warehousing and cold chain, express services, air cargo and shipping (mainly for exim trade), infrastructure assets like terminals and freight stations, railway freight carriages, high-end distribution centres, etc – have increasingly become more prominent.

The new policy initiated by the government is meant to ensure optimal and integrated utilisation (the multi-modalism era, in India and elsewhere has arrived) of assets by adding advanced technological processes. Despite quantitative growth, gaining efficiency has been a sore point and that is now being tackled.

At a time when India plans to further upgrade its economic profile (it aims to be the third largest economy by 2030), the NLP is expected to be that vital fulcrum which will expedite development programmes (old and new) and give the best of results.

While announcing the policy, Modi divulged a new mantra: “Policy plus performance is equal to progress.” And stakeholders in business waiting for this policy to finally become a reality seemed relieved the much-needed catalyst had been introduced.

“Reduced logistics cost and increased logistic efficiencies will energise the economy across sectors in multiple ways and take us many steps closer to emerging as a global manufacturing powerhouse,” CII Director General Chandrajit Banerjee said in a statement.

“The launch of the National Logistics Policy is a seminal moment for India’s logistics sector,” Rizwan Soomar, Chief Executive Officer and Managing Director, DP World Subcontinent, added.

  • Inland waterways are expected to boost the logistics sector

Centre-stage positioning 

For old-timers in the logistics industry, the unveiling of a dedicated logistics policy marks a sea change in the fortune of the sector in less than two decades. This is the culmination of the process of giving a formidable organised base to a sector for rapid future growth in both qualitative and quantitative senses in the coming years.

Considered the business of transporters, truckers and dingy godown owners not too long ago, the sector has been transformed by market forces (the demand for bigger and better automated warehouses and more efficient vehicles) as well as the government, in terms of adding a policy punch and recognising its importance.

 “In the last 7-8 years, the government has emphasised the criticality of the sector with a slew of announcements starting with according it infrastructure status in 2017, creating a separate logistics department within the ministry of commerce and now this dedicated policy. In between, the government has initiated LEADS (Logistics Ease Across Different States) ranking and today we have nearly a dozen states with their own logistics policy,” Vinod Asthana, former MD, Central Railways Warehousing Corporation (CRWC) points out.

 “Till 15 years ago, logistics was not a word used even in discussions within government circles or the then Planning Commission meetings. The word used was infrastructure, as the conventional wisdom was that having good infra hubs, either ports or airports or railway terminals, would ensure improvement in operations. It took quite a while even within government circles to understand that it is the combination of infra and processes that brings efficiency to the overall system,” a former advisor to the Planning Commission points out. 

Needless to say, these initiatives have aided in giving a rejig to the sector. This is reflected in the rapid expansion in the volume of automated warehouses, industrial parks and cold chain facilities, substantial fund inflow from institutional infrastructure financiers, the arrival of more technology empowered solution providers, technology enabled processes deployed at ports and airports in goods clearances, etc.

And all this assisted by a simultaneous push to ongoing gigantic infrastructure projects like the Dedicated Freight Corridors (DFC) and the Delhi Mumbai Industrial Corridor (DMIC) which were kickstarted before 2010 by the then UPA government as well as new programmes launched by the current government like Sagarmala, Bharat Mala, Inland Waterways, and Mission Gati Shakti.

Major consideration 

Those within the government who worked on finalising this policy had clearcut objectives in mind. “When we embarked on drafting the policy, we also realised there were many elements of inefficiency in the ecosystem. Logistics operations have been governed by a rent seeking tendency across the value chain and it has largely been a cost-plus business. Multiple and non-transparent billings have been a critical bottleneck,” says N Sivasailam, former Special Secretary (Logistics), Ministry of Commerce. 

It was during his tenure that the draft logistics policy was framed and released for the feedback of shareholders in 2019. Industry practitioners agree that the cost-plus model has been the driving force of the operations for too long. “The sector has been largely unorganised for a very long time. It is true that for top-of-the-rung established and branded service providers, pruning costs have been a major focus in the last decade or so and they have received positive results. But in an overall sense, multiple pricing has remained a problem area. If a transaction is happening using multiple modes – roadways, railways and ships – there would be different sets of billings, making the process complicated,” agrees a senior representative of a leading transporters association. 

  • The unveiling of a dedicated logistics policy marks a sea change in the fortune of the sector

The new policy will address three primary concerns – reducing cost of logistics to the global benchmarks by 2030, making it to the top 25 countries list in logistics performance index ranking, and creating a data driven decision support mechanism for an efficient logistics ecosystem.

“The troika of Gati Shakti Master Plan, Gati Shakti Vishwavidhyalaya and the National Logistics Policy will transform the country’s logistics and transportation sector. Each of them is transformative but together these magically reduce logistics cost by a whopping 40 per cent (from 13-14 per cent to 8-9 per cent) giving a huge competitive edge to India’s economy,” observes Pawan Kumar Agarwal, Former Special Secretary (Logistics), who emphasises that the policy brings a major shift in strategic terms to the table. 

“There have been three major shifts. Piecemeal development of transport infrastructure now gives way to the National Master Plan State and City Master Plan based geospatial planning; disjointed IT systems are to be replaced by a Unified Logistics Interface Platform (ULIP) and there will be sub-optimal use of existing transport assets to synergetic the use of such infrastructure,” he adds. 

By creating ULIP, the government has brought in the ultimate panacea, which will do away with the typical silo style functioning of operators, while using technology will make the process efficient and transparent. As per the policy paper, ULIP is an open-source platform which works on a request & response-based system that integrates multiple systems of different stakeholders. It is divided into three layers, namely Integration layer, Governance layer and Presentation layer.

Under the Integration layer and the Governance layer, 30 logistics systems of 07 Ministries/Departments covering over 1,600 fields have been integrated through 102 APIs with ULIP. The aim is to create a UPI kind of a structure in which every single transaction of the logistics department can be authenticated. NICDC’s Logistics Data Bank Project (the technology wing of National Industrial Corridor Development Corporation) has been leveraged to develop ULIP. 

Apart from ULIP, the policy also foresees the creation of a digital dashboard – E-LogS. This is envisaged as a digital system for registering, coordinating, and monitoring the resolution of user issues – authorised user associations will thereby register and upload their issues. Furthermore, the new policy facilitates the creation of a Services Improvement Group (SIG) on the lines of the Network Planning Group (NPG).

It will comprise officers nominated from various user ministries and will provide for monitoring and coordination mechanisms for unresolved user issues pertaining to services, documentation, processes, policy, along with identification of interventions for improving the user interface, the policy paper says.

 The road ahead

It is claimed the unveiling of the policy comes as a big booster which would eventually usher in a new age logistics regime comparable with global standards. And the industry at large has welcomed it, calling it extremely progressive.

“Competitiveness of Indian produce and products in global markets has suffered because of the disadvantage of a high supply chain and logistics costs. Besides costs, sub-optimal logistics efficiency has also affected the flawless execution of exports and imports of fresh and other shelf-life-limited products. The new logistics policy with comprehensive coverage of all legs of transportation, if executed well, is expected to bring down the cost of doing business and boost India’s presence in global markets as a more competitive buyer and seller,” emphasises Siraj Choudhary, MD & CEO, National Commodities Management Services Limited (NCML).

  • The new policy will address issues related to warehousing including temperature-controlled storages

According to Ketan Kulkarni, Chief Commercial Officer of the country’s leading air transportation player, Blue Dart, emphasis on creating a quality work pool for the sector through a set of structural programmes is a major highlight. “Employment generation & skilling along with the introduction of new Logistics & Supply Chain courses for students is expected to address the lack of manpower issues in the sector and provide global employment opportunities,” he underlines.

The policy has also been unquestionably praised as a roadmap for a long-haul, efficient journey. “The National Logistics Policy paves the way for infrastructure & service revolution in India as the country charts its growth trajectory for the next few decades. The policy directs all players to collaborate to eliminate pockets of waste and inefficiency,” Jakob Friis Sorensen, MD, APM Terminals Pipavav comments. And then there are those from the manufacturing or retailing side who believe that the NLP will bring a world of difference to their operations.

“It is an extremely vital step taken by the Government that will boost the growth of the automobile sector as the policy focuses on building superior infrastructure like 35 multi-modal logistics hubs, which will promote seamless transportation of goods,” says Vinod Aggarwal, the President of SIAM (Society of Indian Automobile Manufacturers).

Rajneesh Kumar, Chief Corporate Affairs Officer, Flipkart Group, strongly believes that the benefits of the policy will ultimately also trickle down to the consumer. “Along with improving efficiency across the value chain, it will also result in a considerable reduction in logistics costs from their present level, thereby benefiting the end customer with lower costs,” he says.

However, while the new policy may be said to greatly contribute towards creating a new base for the logistics sector, on a micro basis, the debate is on how it will actually roll out. The magical integration that the policy is promising to bring in is a mammoth exercise and, as many analysts point out, would be easier said than done.

The policy paper, ratified by the union cabinet, is concerned with the gradual evolution of solutions and measures with support from the key ministries sharing the onus of the government’s epic-scale Gati Shakti programme. 

After the unveiling of the policy, there will be more follow-ups in terms of announcements of measures on critical parameters like standardisation, digital platforms, etc. For instance, as per the policy paper, for initiating action for bridging digital gaps: ‘Logistics Division, DPIIT will arrange development of Proof of Concept (PoC) for cross-sectoral use cases for logistics stakeholders to address gap areas including Secured Logistics Document Exchange (SLDE) platform (launch in 6 months), digital dashboard to improve container information and availability, Truck Visibility and Positioning Platform (TVPP), Electronic Logging Device (ELD), Import Clearance System for PGAs, Smart Road Enforcement app, etc.’ 

  • Road ahead: reduced logistics cost and increased logistic efficiencies will energise the economy

Similarly, for the setting up of new operational standards across the value chain – ‘Logistics Division, DPIIT, will be in coordination with the relevant standard setting agencies (Bureau of Indian Standards, Institute of Packaging, Food Safety Standards Authority of India, Telecom Regulatory Authority of India, Telecommunications Standards Development Society, India (TSDSI), Telecommunications Engineering Centre (TEC), etc) to develop standards for physical assets (containers, trucks, warehousing including temperature-controlled storages; transportation, terminals, etc.) and service benchmarking (service levels and design standards for sustainable packaging) with due regard to existing international recommendations to ensure inter-operability across modes/asset classes, increase in containerisation, reduction in logistics costs, improved logistics efficiency, etc.’ The policy paper has asked the nodal ministries to collate and compile the necessary standards in six months. 

 Creating collective synergy

The nodal ministries involved in this gigantic exercise include: Ministry of Railways, Ministry of Road Transport and Highways, Ministry of Ports, Shipping and Waterways, Ministry of Civil Aviation, Central Board of Indirect Taxes, Department of Revenue, Ministry of Finance, Department of Telecommunications, Department of Food & Public Distribution, Department of Commerce, Logistics Division, DPIIT, and Ministry of Commerce and Industry.

Even the integration of ULIP entails creating collective synergy between over a dozen large-scale digital platforms currently run by 6-7 ministries and government agencies. The government agencies claim a major part of the exercise has been undertaken and the platform is now open for registration. “The platform is receiving tremendous response from the industry.

To date, 13 organisations – MapmyIndia, Cargo Exchange, Freight Fox, Conmove, Intugine, Eikonatech, Yes Bank, SuperProcure, CargoShakti, Cloudstrats, Shyplite, APSEZL, and AITWA have signed Non-Disclosure Agreements (NDA) to access data on ULIP. NDAs with 11 more organisations like Instavans, Bosch India, Portlinks, Shiprocket, etc are in process,” a DPIIT release issued on 1 October maintained. 

The release adds that a dedicated support team is working round the clock to provide support to industry players for registration on the portal. ‘After registration, users need to submit their use cases, which will then be reviewed based on the proposed usage of the requested data. After a successful review, users requesting data will have to sign an NDA. With the signing of the NDAs, industry players can develop APIs for integration with ULIP.’

“In the past, the logistics sector has also suffered from lack of coordination between the decision-making agencies which are part of different ministries. This time, the government seems to be creating an institutionalised, uniform mechanism asking different wings in clear terms to give up their upmanship tendencies in the greater interest. Let’s see how it evolves,” says a logistics sector veteran who did not wish to be named.

For former Logistics Secretary Pawan Agarwal, the new policy means a new starting point for all stakeholders who must now show a better collaborative spirit. “The Prime Minister, in his speech, clearly mentioned that the policy itself is not the final result. In fact, it is the beginning. It is now asking all the stakeholders to take their respective responsibilities more seriously for the rejig of the logistics sector. We now have a new driving force,” he comments. How this new driving force will accelerate the pace of the $200 billion annual turnover industry (only services, minus physical assets) is something experts are likely to closely examine in the months and years ahead. 

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