Faster implementation is imperative

The logistics sector grows at rates faster than GDP, and investment in logistics infrastructure needs to be made 10 years ahead of requirement, writes Shantanu Bhadkamkar.

The logistics cost given in percentage needs to be examined both for correctness and context, including how it’s worked out. It is not to say that the current costs be justified but most certainly deeper examination is essential. If we factor that service sector contributes 52 per cent to the GDP, then the costs seem even higher than projected. Examining the components, you will find that only 30 per cent of it related to actual transport costs; of which tolls and taxes (both on vehicles and fuel) are a major component. The statistics as presented widely, both in national and in global context give a distorted picture, something which does not facilitate projection of a clear picture for proper policy direction. On policy side, we need a greater focus on coastal shipping, inland waterways, railways and such energy efficient and green initiatives.

For healthy growth of the logistics sector, the much talked about one trillion dollar investment in the logistics infrastructure has to come sooner than later. This investment needs to be done fast as well as at the right place in the right manner. Next to education, investment in the infrastructure fetches highest yields. The logistics sector grows at rates faster than GDP, and investment in logistics infrastructure needs to be made 10 years ahead of requirement. It’s important that both manufacturing sector and agricultural sector grows, so that the logistics sector can grow. India had poor infrastructure at the time of independence. In addition, the average rate of growth over 50 years in investment in the infrastructure is about 5 per cent. We can’t aspire to have double digit growth rates without accelerated investment in the infrastructure including logistics infrastructure. As the Railway Budget doesn’t seem to show this direction even as a policy statement, we don’t expect growth in the cargo. Not just passenger gets priority, the cargo often subsidises the passenger traffic.

There have been suggestions to have a ministry for cargo logistics. It’s not enough to have a ministry for logistics; it needs to be a powerful ministry, preferably under the Ministry of Commerce and Industry. As cargo doesn’t have a constituency, and as cargo can’t talk, the sector continues to be neglected. On operations side, trucks spend less time in moving and more time in waiting (not just in the ports but also in customers premises), something which adds to the costs significantly.

Historically, ports have been an engine of growth of an economy, it generates revenue not just in the port and port related sector but it facilitates the trade and manufacturing. Ports are also critical for the mining sector. Given that 95 per cent of India’s international trade by volume, and 70 per cent by value moves through maritime transport, it is imperative to have adequate good quality maritime infrastructure for movement of raw materials and finished goods. The major ports of India in general have been plagued by a number of problems ranging from high capacity utilisation, poor hinterland connectivity to severe congestion and evacuation issues all leading to high operational inefficiencies. Most of all, there’s a serious need for a structured vocational training in the sector. Since vocational training leads to direct employment, it should be given higher priority and support than education, which is not vocational.

The educational programmes need to be given same stature of degree or diploma depending on the level, failing which it will fail to attract good students. Like in other sectors research and innovation initiatives in this sector are miniscule. It is not enough that few global consultancy firms come out with state of industry report with some findings and some recommendations. It is important that the academia and the students doing doctoral research take lead in deeper study of the sector. Since such studies and innovation initiatives will have direct impact on entire economy, it is essential to give it a very high priority, and need to be taken up by the leading centres of learning.