NLP drives India’s efforts to improve logistics efficiency

India is marking two years of the launch of the National Logistics Policy (NLP) in 2024 with improvements in key indicators, and the economy has indeed seen positive impacts of the policy measures as part of the programme.

The targets of the NLP are to: (i) reduce cost of logistics in India; (ii) improve the Logistics Performance Index ranking – endeavour is to be among top 25 countries by 2030, and (iii) create data driven decision support mechanism for an efficient logistics ecosystem.

Unlike earlier estimates that logistics costs are high in India, it has mostly been in high single digits for more than a decade, according to an estimate by National Council of Applied Economic Research (NCAER). The logistics cost has been estimated to be around 8.9 percent of GDP in 2021-22 by NCAER.

India’s performance on the Logistics Performance Index (LP), developed by World Bank, has improved to 38 out of 139 countries, up from 44th in 2018 and 54th in 2014, thanks to focus on developing infrastructure across the country.

"An inter-ministerial team has been formed to improve performance across all six LPI parameters: customs, infrastructure, ease of arranging shipments, quality of logistics services, tracking and tracing, and timeliness," says a written reply by Som Parkash, Union Minister of State for Commerce and Industry, to the Lok Sabha.

Digital reforms such as Unified Logistics Interface Platform (ULIP) for ease of doing business and Logistics Data Bank which has digitised track and trace of 100 percent containerised EXIM cargo, are presently operational, the government said in the reply.

"In India, logistics is a $200 billion sector with 4.6 billion tonnes of freight transported annually, 65 percent of which is by road and 27 percent of which is by rail," writes Vishnu C. Rajan & L. R. K. Krishnan in their report titled Significance and Implications of National Logistics Policy of India published in Georgetown Journal of International Affairs.

"It is estimated that last-mile delivery – the final stage of the delivery process through which the goods reach the end consumer – costs around 40 percent of the overall logistics cost. As a result, logistics constitutes 13-14 percent of India’s GDP as opposed to 8-11 percent in most major economies. However, nearly one-third of its logistics spending results from inefficiencies in infrastructure. Additionally, consumers, who are generally not interested in paying for transportation overheads, often pay prices that include transportation costs. Hence, saving on logistics would reduce commodity prices, making India more competitive in global markets, thereby benefiting consumers and manufacturers alike. This would fulfil the NLP’s objective to reduce transportation and logistics costs, improving market efficiency."

Key achievements of NLP include the integration of technology for smoother freight movement, increased focus on infrastructure development, and an emphasis on skill development in the sector, says Zaiba Sarang, Co-Founder, iThink Logistics. "The policy has also promoted the standardisation of logistics processes and documentation, which has helped streamline operations and improve transparency across the board.

"NLP has played a pivotal role in improving India’s ranking on the Global Logistics Performance Index. By promoting infrastructure development, technology adoption and reducing regulatory bottlenecks, the policy has contributed to greater efficiency and reliability in logistics. The policy’s focus on multimodal transportation and digital integration has directly impacted performance metrics such as customs efficiency, infrastructure quality, and shipment tracking."

Uday Sharma, Chief Commercial Officer, Allcargo Gati had this to say: "The operations at Allcargo Gati align seamlessly with the National Logistics Policy (NLP) and the national regulatory framework with a strong focus on efficiency, sustainability, and, most importantly, digitalisation. A key achievement has been the enhancement of our TMS, which now provides real-time shipment tracking throughout the logistics chain. This has streamlined processes, improved service accuracy, reduced turnaround times, and elevated the overall quality of services offered to our clients."

The National Logistics Policy has been a boon for India in its aspiration to become a $7 trillion economy by 2030, says Nikhil Agarwal, President, CJ Darcl Logistics. "Reducing logistics cost, enhancing infrastructure and trading operations in the policy are planned to make India as a global logistics hub. In the last two years, the policy has handled fundamental issues by leveraging technology, advocating for a multi-modal transport system, and enhancing the business environment.

"This policy has been effectively implemented across diverse ministries and has provided the logistics sector with a solid foundation of structural improvements and systemic transformations. The policy has provided unprecedented business opportunities and supply chain enhancements through government-led industrial collaboration and stakeholder coordination, which could help India actualise its dream of transforming into a developed country by 2047. The changes in policy goals towards innovation, sustainability, and improving infrastructure are gradually pushing the country towards a more competitive logistics environment."

Overcoming challenges like regulatory delays, infrastructure gaps and skilled workforce shortages will be key to staying on track.
- Zaiba Sarang, iThink Logistics

Tech challenges
Technology can drastically reduce friction in logistics by improving real-time visibility, optimising routes, and automating key processes, says Sarang. "AI and machine learning can predict demand and adjust inventory management while blockchain can improve the transparency and security of supply chains. Furthermore, automated sorting systems, digital warehousing solutions and GPS-enabled tracking can help streamline operations, reducing human error and delays."

Sharma of Gati adds: "Optimised application programming interface (API) integration allows seamless retrieval of shipment details, eliminating the need for inquiries through forwarding companies or external ERP systems. This advancement has significantly improved information flow and transparency, thereby supporting the goals of the NLP, which prioritises digitised logistics. These improvements not only enhance operational efficiency but also minimise disruptions within the supply chain."

Over the past two years, NLP has significantly transformed the logistics sector, particularly through its integration with the ULIP, says Murugan Manoj Kumar J, Founder and CEO, RoaDo. "From our vantage point as a logistics tech startup, the policy has streamlined operations by reducing regulatory complexities and enhancing real-time tracking and visibility. This integration has simplified data management and compliance, resulting in more efficient and responsive logistics processes.

"Government support has been notably proactive, addressing industry feedback and facilitating smoother interactions with regulatory bodies. Investments in infrastructure and a push towards technological adoption have further bolstered operational efficiency. These changes have not only improved service delivery but also strengthened market competitiveness. As the policy continues to evolve, ongoing collaboration and innovation will be crucial in maximizing its benefits and driving further advancements in the logistics sector."

Measures such as using hybrid vehicles and implementing route optimisation not only reduce fuel consumption and emissions but also align with the NLP’s focus on green logistics, offering both environmental and economic benefits.
-Uday Sharma, Allcargo Gati

Is sustainability a concern?
Not really, says Sarang while adding that NLP can integrate sustainability initiatives by encouraging the adoption of green logistics practices such as electric vehicle fleets, renewable energy sources in warehouses and fuel-efficient transportation systems. "By aligning NLP goals with the government’s environmental objectives, India can work towards reducing carbon emissions while enhancing operational efficiency. Infrastructure development with a focus on sustainability could also support long-term environmental goals."

With rising environmental concerns, our logistics strategies have evolved to reflect sustainability goals, adds Sharma. "Measures such as using hybrid vehicles and implementing route optimisation not only reduce fuel consumption and emissions but also align with the NLP’s focus on green logistics, offering both environmental and economic benefits."

Challenges ahead
Structural reforms in the logistics sector, particularly in infrastructure and customs, were long overdue in India, says Rajan and Krishnan in their report. "In this direction, the NLP facilitates rapid technology adoption and creates synergies among government ministries in developing and implementing logistics projects. The methodology proposed to achieve a balanced modal mix by harmonising roadways, railways, airways, and waterways is promising and should yield strong results.

"The policymakers should seek to match the strategies employed by the United States and China in the logistics sector. To emulate China’s infrastructure policies during the early 2000s, India’s government must continue to encourage private participation in infrastructure development and manage the operations of logistics terminals. If not acted on promptly, logistics may remain a bottleneck in the path of development, constraining the progress in both the primary and secondary sectors of India’s economy."

The policy has provided unprecedented business opportunities and supply chain enhancements through government-led industrial collaboration and stakeholder coordination, which could help India actualise its dream of transforming into a developed country by 2047.
-Nikhil Agarwal, CJ Darcl Logistics.

Given the current landscape, it is crucial to systematically upgrade our infrastructure and technological capabilities to optimise logistics costs, simplify operations, and meet the ambitious objectives set by the NLP, adds Sharma of Gati. “However, this approach must go beyond market expectations to keep the logistics sector at the forefront of India’s transformation, achieving both operational excellence and environmental sustainability.”

Sarang feels meeting the ambitious NLP targets within the established time frame will depend on continued collaboration between the public and private sectors. "With significant government support and focused implementation on critical infrastructure and technology, India is on the right path. However, overcoming challenges like regulatory delays, infrastructure gaps and skilled workforce shortages will be key to staying on track.

"We aim to reduce logistics costs by 15-20 percent over the next two years by optimising our supply chain operations through AI and automation. This includes improving last-mile delivery efficiency, enhancing warehouse management and integrating more sustainable practices in our fleet. We are also focused on expanding our footprint in tier-2 and tier-3 cities, improving the ease of movement for goods across diverse geographical regions."

The central government has approved eight important national high-speed road corridor projects of length 936 km at a total capital cost of Rs 50,655 crore to improve logistics efficiency, reduce congestion and enhance connectivity across the country, according to an update from the Ministry of Road Transport.

The projects include the six-lane Agra-Gwalior corridor, four-lane Kharagpur-Moregram corridor, six-lane Tharad-Deesa-Mehsana-Ahmedabad corridor and the eight-lane elevated Nashik Phata-Khed corridor near Pune.

As the policy continues to evolve, ongoing collaboration and innovation will be crucial in maximizing its benefits and driving further advancements in the logistics sector.
-Murugan Manoj Kumar J, RoaDo
 

"The length of national highways has increased about 1.6 times from 0.91 lakh km in 2013-14 to 1.46 lakh km currently. There has been a significant increase in pace of award and construction of national highways in the last 10 years. For instance, the average annual pace of award of NH contracts has increased by 2.75 times from about 4,000 km in 2004-14 to about 11,000 km in 2014-24. Similarly, the average annual construction of national highways has also increased by about 2.4 times from about 4,000 km in 2004-14 to about 9,600 km in 2014-24. The total capital investment in national highways including private investment has increased by six times from Rs 50,000 Crore in 2013-14 to about Rs 3.1 lakh crore in 2023-24."

The corridor approach, according to the ministry, has led to the identification of a network of 50,000 km of high-speed highway corridors through a scientific transport study based on Goods and Services Tax Network (GSTN) and toll data to support India's transformation into a $30+ trillion economy by 2047.