“Today, India prepares the ground before bringing any policy. Only then the policy can be implemented successfully. The National Logistics Policy has not come out of the blue and there are eight years of hard work behind it,” said Prime Minister Modi while unveiling the policy on the 17th of September 2022.
No doubt, eight years of dip-stick study and consultations with all stakeholders has helped the government to come out with a policy that would take the Indian logistics sector to greater heights. The National Logistics Policy that was approved by the Cabinet within a couple of days of Prime Minister integrating the processes associated with various ministerial agencies and authorities is expected to pave the way for smooth and seamless processes to ensure the speed – the most important factor – to bring down the total logistics cost.
Similarly, the policy aims at creating national infrastructure in terms of transit hubs, storage, freight corridors etc., that is expected to give a sustainable growth not only for the logistics sector but mainly for the economy of the nation.
However, the policy that is focusing on effective process management and national infrastructure appears to have failed to recognize the most important requirement of building national freight capacity that is critical for accelerated growth of Indian international trade.
The country that has the aviation footprint for a century has not created national (desi) air cargo capacity for international air cargo though we see one or two players surfacing and vanishing in recent days.
Similarly, the country with a vast coastline that has put in great efforts in developing the sea ports’ capabilities has not seen even an Indian flag carrying shipping line that can match a foreign one in terms of recognizable capacity – either tonnage/ TEUs or routes.
When a country depends on foreign air operators or shipping lines for capacity to ship its cargo, it is evident that ìts foreign trade competitiveness is determined by them by holding a firm control on freight and other related costs.
The market is facing high freight and other related costs not because of increasing operational costs but mainly due to exploiting the inability of the Indian market in creating its own capacity. The foreign operators regulate capacity, creating artificial demand to raise freight and other related costs, thus, putting Indian trade on backfoot.
In the Indian air cargo market, foreign air operators decide what cargo to be accepted, and at what cost, thus providing a geo-political contour to India’s international trade. No doubt, the National Logistics Policy aims to bring down the logistics cost from 14% to 8%. But it can happen only when the freight costs and related costs are under control.
It can be under control only when the carriage capacity lies in the hands of Indian operators. It can happen only when national (desi) capacity is built to counter the foreign operators. For a sustainable growth of Indian logistics business and to keep the cost of logistics down, the country needs a policy that encourages building of national (desi) capacity and till that time, the national logistics policy can only be a wish-list and be seen in print in the policy paper.
This article by B. Govindarajan, Chief Operating Officer, Tirwin Management Services originally appeared in the October 2022 issue of Logistics Insider magazine. All views expressed in the article are his own and do not represent those of any entity he was, is or will be associated with.