LOGISTICALLY SPEAKING. Cut logistics cost to ‘Make More’ in India

The Prime Minister’s ‘Make in India’ pitch is getting shriller, and rightly so. Modi touched the right chord – to make the country a global manufacturing hub! No one disagrees with the view that the country needs a manufacturing push, given the sector’s lower contribution to the GDP.

However, it is a matter of concern that the very issues that make manufacturing in India less-attractive are seemingly being overlooked. This appears to be the case in the logistics sector.

A container takes nearly four weeks to reach Delhi after being unloaded at Jawaharlal Nehru Port, near Mumbai. There is a huge backlog that the boxes landed are despatched after 25 days. So a manufacturer located in the north has to wait for about a month to receive imported inputs or has to manage his inventory accordingly. Naturally, this adds to his cost in addition to the uncertainty of supplies and attendant risks.

The situation at JN Port – the country’s largest container port handling more than 55 per cent of the national traffic – only reflects the state of affairs in the port sector. The port management, the rail operator and the warehouse keeper all claim that the delay is beyond their control.

All stakeholders in the port sector admit that ports are plagued by inadequate drafts, shortage of equipment, lack of storage space and last but not the least, hinterland connectivity. Ask even a small scale manufacturer and he will tell you how the transit delay increases his production cost. Wouldn’t the priority be to help him cut his cost? Simple steps bring big change. The fact is that although a number of roadblocks in the logistics sector (such as procedural issues) are minor and easy to remove, they continue to jam the system just because they need the consent of say, more than one department or ministry.

A problem that can be settled across the table between the chairman of a port and the collector of customs will remain for months for the need of approval from their Heads in New Delhi. Similarly, co-ordination among the four modes of transport – road, rail, aviation and shipping – to ensure a smooth multimodal system often seems the most difficult. A couple of things could go a long way to help reduce the transit cost. First, take up those issues (such as procedural matters) which have already been identified and can be sorted out without any fresh investments or revenue loss to the Government. Work out a time-bound plan to ensure that these irritants are removed forever. Second, work out a national logistics strategy to divert cargo from the high-cost mode of transport to low-cost eco-friendly mode that is from road to rail and from rail to ship. Today, roads carry the maximum cargo – nearly 60 per cent – followed by rail (30 per cent) and then coastal shipping (seven per cent). A lot needs to be done in terms of improving the overall supply chain management to bring down costs.

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