India’s Logistics Cost Index set to release soon

India will soon be introducing its Logistics cost index that will provide granular data and help investors and policymakers formulate projects and interventions to improve efficiency, informed officials in the Department for Promotion of Industry and Internal Trade (DPIIT). 

According to the officials, the work on putting a framework for devising a logistics cost index is in the final stages. 

Under the initiative, multiple indexed data will be provided to capture product-wise as well as region-wide logistics cost movement on a forthrightly or monthly basis on the lines of WPI and CPI, the officials quoted above said.

The DPIIT will also bring annual, all-encompassing, national logistics cost data based on Indian systems to provide a truer picture of the costs involved in moving goods and services across the country. 

“The artificial neural network method that is a system used globally to determine logistics cost relies largely on international data sets of things coming from outside or business trying to happen with India and things that move out from here. So, international estimates on logistics cost in India is largely based on the cost of moving in and out of trading ports in the country that is determined by global shipping lines”

Surendra Ahirwar, joint secretary, DPIIT.

“It is here that determination of logistics costs based on the Indian system and involving actual cost within the country will bring out truer estimates on this critical data that has wide-scale ramifications. The cost indexes will further strengthen estimates on logistics,” he added.

“We will soon have a consultation meeting with experts from industry, academic, and government on domestic logistics cost index. There is an internal cost and a domestic cost. Much of the transportation cost by the shipping lines and they are not in any sovereign control.”

The Logistics cost in India is unorganized and fragmented, leading to high logistics costs estimated as 14-15% of GDP, against 7-8% in developed nations such as Singapore and the US, which leverage it to boost exports. 

Launched in September, the National Logistics Policy (NLP) aims to bring down logistics costs and address logistical challenges. The NLP aims to bring down India’s logistics cost to 8% in the next five years.

Due to the fragmented logistics in the country, about 16% of India’s agri-production is wasted at different stages of the supply chain and the new policy seeks to limit losses incurred while transporting perishable commodities to under 5% by improving the warehouse facilities and cold chain efficiency.

The PM GatiShakti National Master Plan, aimed at bringing logistics costs on a par with developed nations, would save the government ₹10 trillion annually, commerce and industry minister Piyush Goyal has said.

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