“The earlier estimate was subjective, which has now been replaced by a rational number” Dr Surendra Ahirwar on India’s Logistics Cost

We all know about the Unified Logistics Interface Platform (ULIP). It has three layers –

  • The integration layer that integrates ULIP with various logistics systems in the country (rail, road, air, shipping,ports, ICDs, Customs, etc). 35 systems that pertain to different ministries have been integrated already with ULIP. These reflect different data sets as well.
  • The administrative layer that includes the entire server.
  • The application layer is almost left completely to the private sector. On this layer, people can make different digital systems which, basis the data set available on ULIP, can make any kind of application for tracking, booking, ERP, human resource, transactions, etc. These will be integrated into the application layer through APIs.

There will be a lot of systems under development, including tracking systems for trucks, ports, railways, etc. Irrespective of different modes of transportation having their respective tracking systems already, the ULIP is going to facilitate and provide an opportunity to develop a common application that can track cargo through any mode of transport.

The National Logistics Policy sets a target for reducing logistics costs to the global benchmark. However, there is no clear benchmark for logistics costs in India. The widely cited 13-14% figure is based on a statistical model, not a method. This figure is not accurate and does not reflect the true cost of logistics.

To develop an accurate and objective target for reducing logistics costs, the Ministry of Commerce and Industry undertook a logistics cost analysis. This analysis was conducted by a task force that included experts from NCAER, Niti Aayog, MoSPI, ADB, and the World Bank.

The task force used a hybrid approach that included data from secondary and primary research. They also conducted surveys of service consumers to get their perspective on logistics costs.

The analysis found that the logistics cost in India is significantly higher than the global benchmark. The task force attributed this to several factors, including poor infrastructure, inefficient processes, lack of transparency and high taxes.

The task force developed a new logistics cost model that takes into account these factors. This model will be used to develop policies and initiatives to reduce logistics costs in India. The analysis was a comprehensive and objective effort to develop an accurate understanding of logistics costs in India. The new logistics cost model will be a valuable tool for policymakers and businesses alike.

I would not call it a “plan” per se, but there is certainly an aspiration to reduce costs. However, there are limits to what we can do. We cannot reduce costs to the point where the logistics sector becomes unviable. The cost of logistics is a revenue stream for the industry, and if we eliminate that revenue stream, the industry will cease to exist.

We are exploring ways to reduce costs without harming the logistics industry. We need to find a balance between reducing costs and ensuring that the logistics industry remains viable.

The Logistics Cost Framework (LCF) is not a onetime exercise. We will need to conduct periodic assessments of logistics costs to ensure that they remain at a reasonable level. If logistics costs begin to increase, we will need to conduct another assessment to determine the cause of the increase and develop strategies to address it. The frequency of LCF assessments will depend on the volatility of logistics costs. If costs are relatively stable, we may only need to conduct assessments every few years. However, if costs are volatile, we may need to conduct assessments more frequently.

We are still working out the details of the LCF, but we are committed to reducing logistics costs without harming the logistics industry.

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