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Railways key for logistics policy success

The sub-optimal rail-road mix in freight movement is a major concern. The railways has to effectively resolve several existing constraints if the National Logistics Policy vision is to be realised

Railways key for logistics policy success
The division has also proposed a Committee to be set up with representatives from leading research institutions and key line ministries.

Emphasising the imperative of effective implementation of the new logistics policy, PM Narendra Modi said, “When parameters, roadmap and timeline for performance come together, then ‘policy plus performance equal to progress’ emerges”.

The success and real impact of the NLP is predicated on the government effectively developing and coordinating the programmes and plans germane to the policy with the concerned central government departments and agencies coordinating with the states. The states’ role is indeed a crucial one. The Logistics Division envisages an independent agency to be tasked with annual performance assessment of states through the Logistics Ease Across Different States index, along with hand-holding of states/UTs in the development of their logistics ecosystems and providing a roadmap for improving logistics efficiency. The division has also proposed a Committee to be set up with representatives from leading research institutions and key line ministries.

The burden of making the policy deliver devolves on multiple stakeholders, particularly the Logistics Division. There should be no oversight overload, no hint at straitjacketing initiatives and schemes of individual departments. Let prudent participants in respective ministries, departments and agencies assume ownership of their sectoral obligations, and animal spirits of industry players flourish to win the game.

Logistics has shifted from being a cost centre to being a centre creating value. The weight of goods to the value of goods changes (i.e., the weight/value ratio tends to drop, away from bulk goods). With the decline in air transport costs, the price of speed has fallen dramatically. Goods with the highest time-sensitivity have seen the fastest increase in trade. Falling communication costs have resulted in greater fragmentation of services into “components,” supplied from across the world for assembly and sale to final consumers.

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Today, an integrated logistics service involves convergence of traditional transport infrastructure with the world of IT. To achieve an optimal modal mix, it is advocated that share of liquid bulk cargo transported via pipeline be raised from 55% to 80%, the mode-share of coastal shipping and inland waterway transport from 8% to 15%, and, importantly, rail’s mode-share of freight transport be increased to 50%.

Carrying more than 95% of country’s total freight, railways and roads dominate India’s transport landscape. Within these two modes, less than 3% of road length of national highways and expressways carries over 40% of all road traffic; 1/6th of the rail network carries over 2/3rd of all rail traffic. The sub-optimal rail-road mix in freight movement is a major concern. Contrary to the avowed aim of policymakers to substantially enhance the railways’ share in nation’s transport market, the latter has, instead, steadily been declining. The railways’ share (by tonne-km) fell from 86% in 1950-51 to 62% in 1980-81, 39% in 2000-2001, to estimated 25-27% currently. It has had a steeper fall in passenger business, from over 74% (in terms of passenger-km) in 1950-51 to 18% in 2000-2001, which by now is shrunk to less than 10%.

Railways out-prices itself in freight business by cross-subsidising passenger travel, while its antediluvian systems like exchange yards to serve large industrial projects and inflated capital and operational costs for private sidings unduly increase overall costs for rail freight customers. Railways has been losing most of the low-density, high-value cargo. The huge potential for containerisation of domestic cargo offers opportunities for an exponential growth in the sector, simultaneously with a challenge for the railways to put in place the requisite line-haul capacity, terminal facilities, appropriate tariff structure, and facilitating environment for intermodal development.

At the heart of the railways’ freight strategy is the creation of high-volume, high-speed freight corridors, calibrating the services to create critical mass of wagons/containers carrying piecemeal general goods in train loads, in partnership with other players. To meet customer expectations, the rail freight service would need to offer short, fast, reliable and flexible trains, working in a hub-and-spoke networks. A standardised pallet, like airline ULDs, will help handle piecemeal general cargo by road or rail.

For an institutional framework to evolve conducive to an optimal growth of transport sector, some of the recommendations made by the National Transport Policy Development Committee are indeed relevant, such as (a) A unitary transport ministry for a coordinated development of rail, road, shipping and aviation sectors; (b) effective regulatory mechanism to safeguard stakeholders’ interests—including of investors, operators, and consumers. Road transport, being designated a ‘concurrent’ subject in the Constitution and there being no provision of ‘intermodal/multimodal transport’ in the list, appropriate legislation may be necessary to cover all aspect of logistics, as also taxation parity between various modes.

The author is Senior fellow, Asian Institute of Transport Development, Delhi   Views are personal

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