A sound infrastructure system is the backbone of any economy. A well-organised infrastructure design should have a three-tier model, with hard infrastructure, soft infrastructure and middle infrastructure. For the past few years, building the hard infrastructure. Projects such as the construction of airports, ports, industrial parks, roads & highways and dedicated freight corridor have been taken up as part of the initiative.

A significant development in improving the soft infrastructure, meanwhile, has been underway in the form of GST. The efforts at uniform taxation, seamless movement of goods and services and usage of technology in various applications fall in the section of soft infrastructure. Mid-level infrastructure are those which connect the hard and soft components and make the whole model a success.

Mid-level infrastructure comprises warehouses, multi-modal logistics parks, cold chain, cross docks and the like. It also means a right linkage to the truck terminals, toll collection system and check posts—which facilitate trade and help the entire process to function seamlessly.

Though the groundwork has been done for developing the country’s infrastructure over the last decade, it still has not reached the required heights. Unfortunately, no effort is being put in upgrading and improving the mid-level infrastructure. There is a grave need to create large scale warehouses, logistics parks, hubs, modern truck terminals and cold chain network. Construction of more transportation hubs and logistic SEZs should be initiated, which will create common and shared facilities for transporters, reducing their fixed costs.

In an endeavour to keep up the quantity of road network, there has been a compromise on the quality of construction. Indian roads are crammed and are of poor quality and the highways are not well-managed, leading to encroachment of animals, pedestrians and all types of vehicles. This reduces the efficacy of the highway, lengthens commuting hours and increases the risk of accidents. For these reasons, the average speed of a truck in India is merely 20 km/hour, resulting in 250-400 km being covered in a day compared with 700-800 km in developed countries.

Transporters lose much time on their way due to check-post delays at both interstate and intrastate posts. Interstate check-posts look for sales tax documents related to the consignment, route permit and collection of the entry tax. Intrastate check-posts play a role in checking the documents of the driver (licence), the vehicle and collection of highway toll and octroi. The time spent in complying with these check post requirements affects the cost and time competitiveness of both logistics service providers and their customers.

In order to address these concerns and to improve the efficiency of road transportation, the government should introduce a ?uniform integrated? tolling system, which would help vehicles drive out slowly instead of stopping and waiting in the queues. Also, a system similar to TIR Carnet used in the European Union should be introduced, which requires no checking of consignments at interstate check-posts since the consignments are sealed at the origin. This will facilitate a smooth flow of high-value, perishable and time-sensitive items.

When GST is introduced, the conventional concept of setting up warehouses near manufacturing units and raw material facilities will undergo a makeover. It would mean that the manufacturer?s logistics decisions would be based on operational efficiency instead of tax optimisation. It will enable the manufacturers and third-party logistics (3PLs) to set up and position their warehouses and distribution channels based on the considerations of time, cost and logic, in contrast to the present situation that is more about saving the central sales tax. Manufacturers now have to maintain warehouses at multiple locations to show movement of goods from one warehouse to another.

As GST will standardise rates across the nation, consolidation is expected in the warehousing segment, as companies will be able to manage bigger warehouses at a few strategic locations. It will also lead to greater adoption of the hub-and-spoke model in infrastructure segments such as warehousing, cold chain and container freight stations, and will reduce logistics costs and enable industry players to reduce prices.

With the high current growth rate of the logistics industry and its expected exponential growth, it is certain that this sector will play a significant role in the economic development of India.

However, there is a long way that needs to be covered when we talk about infrastructure in general. The roads in India are disappointing, despite India having the second largest road network in the world. The government, in its bid to deliver 20 km a day of road, is not laying much emphasis on the quality aspect. But both quality and quantity matter in infrastructure development. Also, not just highways but infrastructural development in rural areas and other supporting infrastructures are also very important.

Once the hard and soft infrastructure are in place, the logistics industry will see exponential growth. But the segment can increase efficiency and become more cost effective only when the government lays emphasis on mid-level infrastructure. This issue has to be addressed in a holistic manner.

The state governments have to be brought in the loop. Even at the central level, there are too many ministries dealing with infrastructure, a possible reason for confusion over who will steer the growth of mid- level infrastructure. A possible solution could be to form an ombudsman body comprising senior officials from different infrastructure related ministries, who can then create a road map for mid-level infrastructure development, taking state governments into confidence.

The author is the executive director of Transport Corporation of India