According industry status to the logistics sector would help to cut down high cost of transportation, thereby making the sector more competitive
Logistics sector and economic development of a country are closely intertwined as higher economic growth leads to better prospects for logistics service providers. However, on the flipside, the Indian logistics sector is highly fragmented and deregulated with 80% of it being accounted by the unorganised sector, which needs to be revamped to meet and fully capitalise on the new opportunities to be tapped. Even 1% reduction in logistics cost in India, which at present stands at about 13% of the country’s GDP, can result in huge savings. The high logistics costs in India are due to non-competitiveness of the sector and several other associated factors, of which lack of proper infrastructure is the foremost.
Getting the right logistics infrastructure is critical and the most important factor to determine a country’s competitiveness. It is surprising to note that although national highways account for only 2% of the total road network, it carries almost 40% of the overall road traffic. Poor maintenance of roads in India leads to accidents and also forces vehicles to move at a slow pace, resulting in loss of time and energy. There has not been much development of rail infrastructure and rail connectivity to Inland Container Depots (ICD) is very poor. Moreover, at the ports inadequate capacity and limited cargo handling facilities lead to tremendous inefficiency. Several ministries handling the sector The logistics sector in India has not been accorded any industry status and currently it is being handled by multiple ministries at the centre such as Ministry of Railways, Ministry of Road Transport and Highways and Ministry of Shipping. The lack of industry status poses problems for the under-capitalised small truck operators, who find it difficult to raise funds through organised banking or financial channels. Therefore, it is virtually impossible for them to invest in modern equipment and technology to increase efficiency and reduce transportation costs. When the sectors are organised, industries develop on account of uninterrupted flow of resources for development. It is important to note that the logistics sector contributes a significant chunk to the country’s GDP and several other sectors such as retail, pharma, agriculture, food processing etc are dependent on this sector as they need better facilities for storage and faster transportation of goods. According to the Associated Chamber of Commerce and Industry, providing industry status alone would assist development of the sector and bring down the current logistics costs. Other hurdles Of several other hurdles, shortage of skilled manpower is another cause of concern in the Indian logistics sector. The government should join hands with industry associations to undertake sector-specific projects and organise tailor-made training programmes. It should set up driver training institutes to train drivers about vehicle maintenance and road safety norms.
In order to stay ahead of competitors, logistics companies need to cater to consumer demand without compromising on quality as well as frame competitive prices for their services. Also, on account of companies’ increased focus on core capabilities, these days logistics activities are increasingly being outsourced to third-party players. Vineet Agarwal, executive director of Transport Corporation of India, India’s leading integrated supply chain and logistics solutions provider |
