The laying of the foundation stone at the Jewar Airport which the Prime Minister described as the “logistics gateway to North India” is a much-needed milestone in India’s push to augment and enhance its logistics infrastructure. In the Logistics Performance Index 2018 issued by the World Bank, India ranked at 44 with a score of a mere 2.91 in infrastructure (Germany ranked one with a score of 4.37).
This points to an infrastructure gap that manifests itself in high logistics-related costs in India (13 per cent of GDP vs 7 per cent for developed nations) and needs to be redressed on war footing for the logistics sector to pioneer the nation’s aspiration of becoming a $5 trillion economy.
The country faces a skewed logistic modal mix with nearly 71 per cent of all freight transport being done by roads. Highways only account for 2.2 percent of the entire road network but carry 40 per cent of all freight traffic, thereby putting immense strain on the highway network of the nation.
This is evident from the fact that it takes nearly 22 hours to travel by road from New Delhi to Mumbai but a similar distance between Beijing and Shanghai can be covered in 12.5 hours.
The Railways’ share in freight transport has dropped from 89 per cent in 1950-51 to only 18 per cent in 2020. The average speed of a freight train in India is only 25 km/hour with a permitted axle load (freight capacity of wagons) of 20.1 tonnes. The US, which has a vast rail network like India’s, runs its freight trains at an average speed of 38 mph (60 kmph) and permits an axle load of nearly 30 tonnes.
The picture is similar in terms of the air cargo handled. According to the Ministry of Civil Aviation’s Annual report 2019-20, India has 23 domestic cargo terminals and 20 international cargo terminals which handled a total of 3.56 million tonne (mt) of cargo in 2018-19. In contrast, the Shanghai Pudong International Airport in China alone handled 3.63 mt of cargo in 2019.
The Government has been quite aware of the need to bridge the infrastructure gap and fast track growth in logistics-related infrastructure in the nation. While articulating the need to lower logistics costs in India, the Finance Minister allocated ₹5.54 trillion towards capital expenditure across various ministries in the Union Budget 2021-22, a 34.5 per cent jump from the previous year.
Mission Gati-Shakti has been launched as a national master plan for multi-modal connectivity which will bring nearly 16 different ministries and departments of the government together to promote coordinated planning and execution of projects. This will aid in development of an integrated logistics and transport policy providing end-to-end connectivity.
Further, the commissioning of the Eastern and Western Dedicated Freight Corridors can be a game-changer for boosting railway freight share as it will not only decongest the existing rail network but would allow for longer rakes to carry higher loads at an average speed of nearly 70 km/hr. This is in addition to the Bharatmala Pariyojana under which 34,000 km of road infrastructure works would be undertaken, of which, 11,000 km have been targeted to be completed by March 2022. The National Air Cargo Policy has also been formulated that seeks to build air transport shipment hubs in all major airports by 2025.
While these initiatives are noteworthy, a few other measures can be undertaken to fully unlock the potential of logistics infrastructure in India.
First, private sector participation must be encouraged. Third party logistics services such as warehouse building and management, and last mile transport provisioning would help bridge critical gaps in the logistics sector. With the government also providing viability gap funding, the warehousing sector provides an apt opportunity for private sector investments.
Second, a National Infrastructure User Committee (NIUC) could be created, which would have representation from various Ministries and private infrastructure companies, to take on-board inputs of private parties and act as a platform to encourage public private partnerships in various projects. The National Council of Public Private Partnerships is an analogous body active in the US that provides a common place to bring together interested parties, identify barriers to PPPs, present case studies of PPP projects, and share best practices in the industry. The NIUC could be modelled on similar lines as well.
Lastly, it is estimated that India would require $1.4 trillion for investing in infrastructure in 2020-25 in order to become a $5 trillion economy. This necessitates the need for cheap, long term finance options. Although grant of infrastructure status to the logistics sector enhances its ability to raise money from various platforms, loans repayable over a 25-30 years are rarely available.
With the infrastructure bond market also small in India, a specialised body developed on the lines of the Indian Railway Finance Corporation could be created for each infrastructural sub-sector that would be capable of doing comprehensive project evaluation and in mobilising resources through innovative and diverse instruments.
Sharma is with the Indian Railway Accounts Service, and Suman is with the Indian Revenue Service. Views are personal
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.