Ranked a lowly 35th on the World Bank's Logistics Performance Index (LPI) in 2016, India is an inefficient place as far as logistics is concerned, with the extant system falling far short of international standards in terms of costs, efficiency, sustainability, and safety.
Ranked a lowly 35th on the World Bank’s Logistics Performance Index (LPI) in 2016, India is an inefficient place as far as logistics is concerned, with the extant system falling far short of international standards in terms of costs, efficiency, sustainability, and safety. Besides resulting in higher cost of doing business, this increases the prices of goods and services. The toll such inefficiency exacts on the economy can be gauged from the fact that India’s annual logistics costs of R25 lakh crore constitute around 19% of its GDP.
With the logistics system skewed towards roads (55%) and rail, pipelines, and waterways accounting for 32%, 7% and 6%, respectively, the cost of per tonne-km logistics is a high R2.3 for roads, R1.2-1.5 for rail, R0.2-0.3 for waterways and R0.1-0.15 for pipelines.
This might change if the Centre’s ambitious Sagarmala project succeeds in unlocking the full potential of the country’s coastline and waterways. “The vision is to reduce logistics costs by up to R35,000-40,000 crore per annum for both domestic and export cargo,” Road Transport and Highways and Shipping Minister Nitin Gadkari has said, adding the project would create 10 million jobs.
Says Jaideep Ghosh, Partner and Head of Transport and Logistics, KPMG in India, “Sagarmala is a transformational initiative, which could potentially change the way we do business. Integrating multi-modal transportation with coastal economic zones encompassing commerce, trade, tourism would boost the economy rapidly, when implemented.”
Port-led development is central to the Sagarmala vision which envisages an infrastructural investment of over
R7 lakh crore. Modern port infrastructure and seamless multi-modal connectivity would be created in tandem with development of competitive logistics-intensive industries. To avail the economic opportunities on offer, the population in adjoining areas would be skilled. Existing industrial capacities in the hinterland are also expected to benefit from Sagarmala.
The government has proposed an investment of $1,989 million on modernisation of ports,
$2,437 m on new port development, $1,818 m on development of port-based industrial parks, and $36 m for coastal community development, a source says.
In all, 142 minor ports have been identified for capacity expansion over a period of 20 years, with a total investment of R91,434 crore. In addition, six new port locations have been identified for development – Vadhavan, Enayam, Sagar Island, Paradip Outer Harbour, Sirkazhi and Belekeri.
For enhancing port connectivity, the Indian Port Rail Corporation Ltd (IPRCL) has been set up to implement last-mile rail projects. It has already taken up 25 works for 9 major ports; of this 4 works have been awarded and another 9 are targeted in the remaining period of the current fiscal.
As for port-linked industrialisation, 14 Coastal Economic Zones have been identified. CEZ perspective plans have been shared with relevant ministries, states and other stakeholders for feedback, the source says.
Keeping in mind skill requirements, the ministry of shipping is currently undertaking a skill gap analysis study in 23 coastal districts. Projects identified through the study would be funded under Sagarmala. The government would also be conducting skill training at four locations across the country.
Inland waterways development is another essential part of the Sagarmala project with the government mulling an investment of $47.69 million. The plan has been approved by the Cabinet.
These projects will be implemented by relevant central ministries, state governments, ports, and other agencies, primarily through the public-private-partnership mode. Besides projects being undertaken by different agencies, R243 crore has been released so far by the ministry of shipping for 14 projects under Sagarmala in FY15-16 and FY16-17.
“Sagarmala will revolutionise the logistics system when implemented,” sums up Vinayak Chatterjee, Chairman, Feedback Infra.