{"id":18617,"date":"2022-11-16T19:36:53","date_gmt":"2022-11-16T14:06:53","guid":{"rendered":"https:\/\/www.indiaeconomyandbusiness.com\/is\/?p=18617"},"modified":"2024-01-31T02:02:05","modified_gmt":"2024-01-30T20:32:05","slug":"indias-logistics-sector-understanding-the-dynamics","status":"publish","type":"post","link":"https:\/\/www.indiaeconomyandbusiness.com\/is\/indias-logistics-sector-understanding-the-dynamics\/","title":{"rendered":"India’s Logistics Sector – Understanding the Dynamics"},"content":{"rendered":"

Launch of GatiShakti<\/em> and national logistics plan brings to focus issues and inefficiencies related to logistics sector. Gatishakti<\/em> targets development of transport infrastructure integrated across different modes to minimize bottlenecks and gaps in capacity. NLP envisages creation of a digital interface which would integrate information across all concerned ministries, departments and states on real time basis and help users plan movement of their goods. Here is a look at what logistics sector comprises of and related issues. <\/p>\n

Logistics essentially refer to movement of input material from source to factories, finished goods from factories to consumption centre and associated infrastructure for storage etc on the way. Unlike a manufacturing process, logistics involve far higher complexity because of dynamic nature of its service, optimization needs arising due to multiple routes, multiple destination, multiple modes of transport, management of empty rakes\/ trucks, issues related to inter-state movement and so on. Unfortunately, India\u2019s transport infrastructure hasn\u2019t kept pace with increasing demand. As a result, logistics cost as a percent of GDP has risen to about 14% against 8-10% in most developed nations.<\/p>\n

India\u2019s total transportation demand stood at about 4.6 billion tons in terms of quantity and 2.2 trillion tons kilometre in terms of quantity times distance in 2021 as per a NITI Aayog report. The enormity of this number is evident from the fact that this corresponds to movement of almost 4,000 railway rakes per day for close to 20 hours every day (assuming entire quantity was moved by trains). Other than the domestic movement, goods totalling about 670 mn tons were moved through ports also as per ministry of ports. (An export cargo moving from Delhi to Mumbai port would be counted as domestic movement as well as port movement). Total tonnage kilometre implies average distance moved by the cargo is 480 km, approx. distance between Mumbai and Ahmedabad, Delhi and Kanpur or Chennai and Mysuru. While the average distance appears less as lot of cargo moves from Northern states to Mumbai or Kolkata, this is so because of significant amount of cargo moving short distance within the state also. This is corroborated by the fact that average distance for container cargo moved by railways was 876 km in FY21 and 928 km in FY20. (Foodgrains cargo move the largest distance at about 1,400 km).<\/p>\n

Out of the total, railways moved nearly 1.2 billion tons or about 25% whereas about 3.2 billion tons was moved through road. An important difference between railways and road traffic is that railways carry bulk of industrial goods whereas finished goods are primarily moved through roads. Among the major items moved through railways, coal accounts for largest share at 540 mn tons (equivalent to almost 400 rakes per day) whereas iron ore accounted for 160 mn tons and cement 120 mn tons, the three accounting for 70% of rail freight traffic.<\/p>\n

Average distance moved by railways is 585 km in comparison to 440 km through roads. While the average for roads is lower than railways, it is still high. Roads are considered useful only for distance below 300 km as cost of road movement is significantly higher at Rs 3.6 per ton-km in contrast with Rs 1.6 for railways. (For 2021, actual cost of movement through road was over Rs 5 per ton-km as per the NITI Aayog report). Shifting half of this to rail would imply savings of as much as Rs 2.5 lakh crore besides reduction in pollution and other nuisances caused due to road movement. This excessive dependence on road network lies at the root of the inefficiency in logistics.<\/p>\n

Against the international benchmark of 25-30%, roads in India carry as much as 70% of total freight load. Transportation in India has become increasingly dependent on roads over the decades primarily due to lack of planning, inadequate priority to freight traffic leading to significantly higher lead time, storage & warehousing issues at the railway yards and so on. As per a World Bank report, share of railway in total traffic stood at as much as 90% in 1951 which came down to 40% in 2005 and is now down to 25%.<\/p>\n

Two of the important measures being undertaken to reduce this anomaly are construction of dedicated freight corridor (DFC) and multimodal logistics park (MMLP). The western and Eastern DFC cover a total of 3,400 km, about half of which has been commissioned so far. These two corridors alone handle almost 20% of total freight traffic. Average freight train speed currently stands at just about 24 km\/hr (primarily due to significant passenger traffic congestion) which can go up to almost three times as achieved during the trial run over a recently commissioned DFC track. Maximum speed achieved during the trial was 99 km\/h.<\/p>\n

The other important proposal is development of MMLP. MMLP is nothing but an interchange point for the cargo in a \u2018hub and spoke\u2019 model along with associated storage facility (including cold storage) etc. MMLPs are also expected to help in obtaining clearances and meet other regulatory requirements. Thus, an MMLP would have cargoes coming-in through, say, roads from different factories, getting aggregated at MMLP and would be moved to their destination through rail or where available, waterways. In the same manner, MMLP would distribute the cargo at the consumption centre. This would help optimize the network with usage of cheaper modes for longer distance and costlier mode providing only the first mile and last mile connectivity. MMLP would also help reduce the wastage in supply chain of perishable goods. The wastage in fruits & vegetables is around 25-30%. Despite being the second largest producer in the world with fruit production of 90 million tons and vegetable production of 180 mn tons, India has not been able to build its supply chain. The master plan also proposes to map all production centres along with the existing infrastructure so that future projects could be planned based on the demand projection derived from this.<\/p>\n","protected":false},"excerpt":{"rendered":"

Launch of GatiShakti and national logistics plan brings to focus issues and inefficiencies related to logistics sector. Gatishakti targets development of transport infrastructure integrated across different modes to minimize bottlenecks and gaps in capacity. NLP envisages creation of a digital interface which would integrate information across all concerned ministries, departments and states on real time […]<\/p>\n","protected":false},"author":8,"featured_media":18618,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[857,858],"tags":[],"class_list":["post-18617","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-industry","membership-content","access-restricted"],"yoast_head":"\nIndia's Logistics Sector - Understanding the Dynamics - Indian Economy & Business Analysis<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.indiaeconomyandbusiness.com\/is\/indias-logistics-sector-understanding-the-dynamics\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"India's Logistics Sector - Understanding the Dynamics - Indian Economy & Business Analysis\" \/>\n<meta property=\"og:description\" content=\"Launch of GatiShakti and national logistics plan brings to focus issues and inefficiencies related to logistics sector. 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