Wed. Jul 17th, 2024

By Mr. Darshan Ghodawat, CEO and Managing Director, AVA Global Logistics LLP.

As the growth story of India’s economic prowess is being written today, it is becoming increasingly difficult to undermine the role and importance of efficient and effective movement of goods. At the heart of the interconnected world, we live in is shipping and logistics that serves as crucial gateway to international trade and commerce. Displaying the capacity to overcome the disadvantages posed by our infrastructure in the short run, India’s logistics sector is gearing up for taking a lead with its competitiveness in the long term.

Darshan Ghodawat Pic

This sector presents several challenges as well as opportunities for the Indian economy. With increasing complexity in logistics and supply chain management, adopting innovative approaches and groundbreaking technology has become imperative to ensure that goods are delivered on time and in good condition. Transporters functioning manually and offline can benefit from emerging technologies like AI, Big Data, and IoT to better their services and compete globally by providing real-time and end-to-end connectivity. A transition toward sustainability too has become lesser an option and more of an essential aspect that all logistics sector stakeholders will have to consider in the future.

The logistics sector has received support from the Indian government through the launch of several initiatives. For one, the Government of India is investing in approximately 100 infrastructure projects to improve first and last-mile connectivity with ports for coal, steel, and fertiliser movement. The FY24 budget allocated around USD 125 billion (INR 10 lakh crore) toward capital expenditure, which will benefit the logistics sector. Critical transportation infrastructure projects worth around USD 9 billion (INR 75,000 crore), including private investment, will be crucial in improving connectivity for ports, coal, steel, fertiliser, and food grains.

In addition, over 39,000 regulatory compliances have been cut down, and over 3,400 legal provisions have been decriminalised to improve ease of doing business. India is not only striving to streamline operations but also emphasising technology-driven solutions. This will enhance the economy by improving connectivity and facilitating seamless movement of goods in both domestic and international markets.

Addressing multimodal connectivity gaps is something that the sector needs is because a lack of investments and delays in logistics infrastructure construction could hinder the government’s coal logistics plan. Moving faster to adopt digitisation by coal Public Sector Undertakings (PSUs), the railways, and others is set to be challenging. The Indian Railways will have a crucial role in building new lines and procuring a large number of wagons. The Coal Logistics Plan and Policy released by the government on February 29, should be beneficial in moving coal to power generation plants. The aim is to make coal logistics cheaper, faster, and cleaner, as the policy also addresses storage and the loading and unloading of coal for delivery to power plants, steel manufacturing units, cement factories, and washeries.

Major coal-producing states of Odisha, Chhattisgarh, and Jharkhand, along with parts of Madhya Pradesh, account for 75% of the total domestic raw coal dispatch in India and the National Coal Logistics Plan recommends 20 new railway lines. These include tripling the Jharsuguda-Barpali-Sardega line, doubling the Angul-Balram line, tripling the Korba-Champa line, a new line from Shaktinagar to Mahadia, and tripling the Nagpur-Wardha line contributing to India’s logistics sector pushing sustained growth despite the various global challenges.

The policy aims to streamline and push dedicated railway corridors for coal transportation and the use of multimodal transport involving conveyor belts, merry-go-round (MGR) trains, rail, and inland and coastal waterways, including rail-sea-rail routes. While these transport options exist, the latest technology and know-how will be used to give it a boost. The policy is expected to boost the share of Indian railways in coal transportation to over 87% by FY30, proposing a shift towards a railway-based system in first-mile connectivity projects, aiming for a 14% reduction in rail logistic costs and annual cost savings of INR 21,000 crore. Mechanised loading and evacuation of 90% of the coal produced through first-mile connectivity by FY30, completion of coal PSU-funded rail connectivity projects by FY27, and the development of a data-driven ‘Decision Support System’ for monitoring the coal logistics ecosystem are among the targets set to further the sectors growth story.

India remains a bright spot in the global steel business, with steel demand expected to grow by 8.6% in 2023 and 7.7% in 2024 compared to a global growth of 1.8% and 1.9%, respectively, according to the Short-Range Outlook of The World Steel Association. Growth in India’s construction sector is driven by government spending on infrastructure and recovery in private investment, supporting the capital goods sector. Adding to this is a healthy growth momentum is expected to continue in the automotive sector, further pushing up steel demand in the country. India is the second-largest producer of steel in the world, manufacturing around 127 million metric tons (MMT) in FY23 and having a total capacity of 161 MMT.

However, inadequate road and rail infrastructure in ports leads to longer lead times and higher first-mile costs. Most east coast ports have limited railway connectivity, causing high congestion on entry roads. Short-haul movements by road tend to increase costs just as poor road conditions between mines and main roads further exacerbates the issue. Insufficient coastal shipment infrastructure and storage space at ports result in a mismatch between port handling and in-land infrastructure capacities, leading to longer transportation lead times. Handling and last mile account for approximately 25% of the total logistics cost, and most steel stockyards lack railway sidings, leading to higher mid-mile costs. With the increase in steel and iron ore demand and production, the requirement for adequate infrastructure and an optimal mix of rail, road, coastal, and national waterways for efficient and seamless inter-state movement becomes significant.

The launch of the National Logistics Policy will aid the PM Gati Shakti initiative. Ministries such as Railway, Shipping, Power, and Road Transport have been identified as Infrastructure ministries, while Coal, Steel, Fertiliser, etc., have been identified as user and beneficiary ministries. India’s logistics sector is moving in the right direction with ministries concerned with India’s infrastructure uploading their rail, road, and port networks on the PM Gati Shakti National Portal. The Ministry of Steel has uploaded geo-locations of over 2,100 steel units functioning in the country on the PM Gati Shakti National Portal paving the way for better logistics in India. What further bolsters this is mapping the geo-locations of all iron ore and manganese ore mines as well along with launching the process of uploading the geo-locations of existing slurry pipelines and laboratories in the steel sector. In line with the PM Gati Shakti Master Plan, the Ministry of Steel has identified 22 high-impact projects to develop multimodal connectivity and bridge infrastructure gaps.

To ensure growth in India’s logistics sector is even and sustained, the government should ensure a complete transition to digital solutions offering visibility across the entire supply chain on a single platform. Providing a comprehensive marketplace solution that shows transactional rates and allows users to bid on them is essential. Fast-tracking the deployment of enterprise business software with seamless implementation across multiple government bodies will help avoid any one-way communication. Fast-tracking infrastructure development, facilitating a complete rollout of a nationwide single-window clearance system, and securing land and other clearances will avoid delays.

The industry must give priority to the adoption of modern digital technologies and the upgrading of legacy systems to support these advancements. Understanding and adhering to complex regulations regarding data protection and privacy is essential and offering integrated logistics solutions can significantly improve operational effectiveness. Introducing, consolidating operations currently handled by intermediaries will reduce cargo exchanges and enhance efficiency. To further drive progress, improving project planning and implementation efficiency is crucial to minimise cost and time overruns. De-risking infrastructure projects by addressing delays in land acquisition and environmental clearances will also help mitigate potential losses.

As the logistics sector continues to evolve, collaboration between the government and industry stakeholders will be crucial in overcoming obstacles and driving innovation. By focusing on sustainable growth, technological advancement, and regulatory compliance, India’s logistics sector is well-poised to navigate global challenges and emerge as a key player in the international market. The road ahead is promising, with the potential for significant contributions to the economy and the global supply chain.

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