LEADS Report 2022

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Context

The Gati Shakti National Master Plan completed one year. To mark the occasion, the Ministry of Commerce and Industry (MoCI) published the fourth edition of Logistics Ease Across Different States (LEADS) Report 2022.

Logistics

Logistics encompasses planning, coordinating, storing, and moving resources —people, raw materials, inventory, equipment, etc., from one location to another, from the production points to consumption, distribution, or other production points.
In short, transport, warehousing and supply chains come together to make up this sector.

LEADS Report

Launch

The ‘Logistics Ease Across Different States’ (LEADS) Report was first launched in 2018.

Objective

The Report is released every year with the main objective of ranking Indian states and UTs on the basis of the efficiency of their respective logistics ecosystems. The index is an indicator of the efficiency of logistical services necessary for promoting exports and economic growth.
The index aims to boost the logistics performance across India, which is critical for reducing the cost of transactions and boosting international and domestic trade.

Ranking

It lists the various actions taken by each state to improve ease of storage and movement of goods, identifies the shortcomings in physical, regulatory and operational environment in each state and gives suggestions to each state on the way forward.
It provides three performance categories – Achievers (states and UTs achieving 90 per cent or more), Fast Movers (states and UTs scoring between 80 and 90 per cent), and Aspirers (states and UTs with percentage scoring below 80 per cent).

Survey Methodology

The LEADS survey assesses viewpoints of various users and stakeholders across value chain including shippers, terminal infrastructure service providers, logistics service providers, transporters and government agencies to understand the enabler and impediments to the logistics ecosystem in the country.
The annual survey processes the data received from stakeholders (perception data) and States/ UTs (objective data) and ranks the logistics ecosystem of each State/ UT using a statistical model.

Findings of the 2022 LEADS Report

Achievers

States in the Achievers category are Assam, Chandigarh, Delhi, Haryana, Himachal Pradesh, Karnataka, Maharashtra, Odisha, Punjab, Tamil Nadu, Telangana, Uttar Pradesh and Uttarakhand.

Fast Movers

States listed in the Fast Movers category include Madhya Pradesh, Rajasthan, Kerala, Puducherry, Sikkim and Tripura.

Aspirers category

The Aspirers category of the ratings have states like Bihar, Chhattisgarh, Goa, Andaman and Nicobar Islands, Lakshadweep, Ladakh, Jammu and Kashmir, Arunachal Pradesh, Mizoram and Nagaland.

How was the 2022 LEADS Report different?

For the 2022 Report, the survey was not virtual but a physical one wherein, apart from the public sector stakeholders, the ones from the private sector were also contacted.
The private stakeholders included Shipper/Export/Importer, Logistics Service Providers (Freight forwarders, CHAs, Custom brokers etc), Transport Service Providers (Truck operators etc) and Transport Infrastructure Service Providers (ICD/CFS operators, port operators, warehouse operators etc.). The aim is to understand the enablers and impediments of the logistics ecosystem in the country.

Significance of LEADS Report

The LEADS Report is an indicator of results of various initiatives for improving the logistics ecosystem throughout the country.
The LEADS Report will assist in the implementation of the PM Gati Shakti National Master Plan (PMGS-NMP) and the National Logistics Policy (NLP) by identifying gaps in the existing logistics services, infrastructure and regulatory environment.

Overview of India’s Logistics Sector

India’s logistics are estimated to account for about 4% of GDP.
More than 22 million people rely on it for their income.
Overall, India’s logistics sector consists of 37 export promotion councils, 40 Participating Government Agencies (PGAs), 20 government agencies, 10,000 commodities and 500 certifications.
In 2019, the Indian logistics sector was valued at Rs. 15.1 lakh crore (US$ 190 billion). The unorganised sector amounts to 99% of the logistics sector that includes owners of less than five trucks, brokers or transport companies' affiliates, small-scale warehouse owners, customs brokers and freight forwarders, among others.
The development of the logistics sector is also reflected by the fact that India scored 90.3% in the United UNESCAP’s Global Survey on Digital and Sustainable Trade Facilitation conducted in 2021, which is an exceptional improvement from the score it secured in 2019 of 78.5%, brought about by gains in the scores of five important indicators.

Challenges faced by the Logistics Sector in India

Overview

Logistics in India, unfortunately, is highly fragmented, and to date, 85 percent of the transporters own less than 20 trucks,when it comes to warehousing over 90 percent of warehouses are smaller than 10,000 square feet each. Going forward, the warehousing space opens up the opportunity for consolidation and further growth.
Organized players account for only 3.5 percent of the logistics market. However, they are expected to grow much faster at a compounded rate of more than 35 percent over the next few years.
The total logistics spending in India is a major lag because almost 14 percent of the GDP is spent on logistics costs, which is significantly higher than developed countries like China, US and Europe, where the global average is somewhere around 8 percent. So there's lots of room for improvement.

Transportation Issues

In India, a predominant mode of freight cargo transportation is via road, with nearly 60% cargo moved by road and 32% by rail. Due to over-saturated rail networks and high rail tariffs. Movement of goods is done by road transportation, which proves to be quite inefficient, because of poor road infrastructure, multiple checkpoints, and congestion.

Port Sector Issues

Due to high turnaround times for ships because of overcrowded berths and delay in cargo evacuation unloaded at berths, logistics companies in India suffer unreasonably. Coastal shipping in India gets hampered due to the weak land side and port facilities, and insufficient depth at ports discourage large vessels, thus curbing the large scale use of it for freight movements.

Tax Structure and Warehousing Problems

The complicated tax regime places several hardships on logistics companies in India. Multiple State and Center taxes lead to considerable loss of time in transit on roads. The poor state of warehousing and their restricting locations are one of the few major concerns of this industry. Storage facilities are quite fragmented for low margin products thereby resulting in a disincentive to create a large integrated warehousing space. The Government owned most of the large warehouses and used for food grain.

Technological and Skill Deterrents

In India, automation of processes is still in the embryonic stage and non-standardization in the industry due to its fragmentation further slows down the progress. Acceptance and adoption of technological advancements like RFID, tracking, warehouse management system, etc. can resolve the issues between domain requirement and IT. Besides this, there is lack of quality workforce in this sector, and the available skill set needs to be upgraded urgently.

Fuel Costs

The highest challenge in logistic industry is high fuel costs. If the fuel prices goes high is likely to increase transportation costs to the shippers. Raising the fuel prices are increasing the surcharges added to freight rates, this will cut down the revenue and earnings of truckers as fuel prices increase.

Customer Services

Customers want the full clarity into where their delivery is at on time. Now a days, the location of a shipment is as associated as your social network. In fact, the customer anticipation have increased, their readiness to pay for speedy shipping has declined with just about 50% of consumers not in the mood to pay anything excess for less than two-day shipping.

Driver Shortage & Retention

Employment and detainment of the driver will be an issue despite the lower demand of the shipments.

Government Regulations

Government Regulations Carriers face significant compliance regulations imposed by government of state and other authorities.

Overcoming the challenges

The need of the hour is to develop adequate infrastructurein the fringe areas of major metropolitan trade hubs of the country and in high commerce corridors.
To combat other legal challenges, it is suggested that there should be an organized inventory of all logistics and supply chain documentation.
Furthermore, moving forward to a technology-driven documentation approachwould highly impact the logistic sector by avoiding transit delays and untimely deliveries.

Government’s Role Towards the Development of the Logistics Sector

The government has initiated various steps to boost the logistics sector, such as follows:

National Logistics Policy

The proposed policy's objective is to boost the nation's economy and corporate competitiveness by establishing an integrated, seamless, effective, dependable, green, sustainable and cost-efficient logistics network that makes use of best-in-class tools, procedures and qualified personnel.
The policy aims to reduce the logistics cost, which stands at 14% of GDP to 9-10%.
The strategy will establish a single-window e-logistics market and emphasize developing skills, competitiveness and employment for MSMEs.

National Logistics Law

A national logistics law has been drafted and is under consultation. Through a unified legal framework for the paradigm of One Nation, One Contract, it would support the One Nation, One Market objective and provide a flexible regulatory environment (single bill of lading across modes). The law's provisions will make it possible to assign a distinct logistics account number in place of cumbersome registration processes.

Logistics Master Plan

This initiative takes a geographical strategy as opposed to an industry approach.
Several projects and activities will be integrated into the plan to expand the mix of intermodal and/or multimodal transportation. Coordinated construction of relevant infrastructure (gas and utility pipelines, optical fibre cable networks) is planned to prevent problems in the future. An Inter-Ministerial Committee will be used to supervise the master plan's execution. The state and local logistics strategies will be created in coordination and cooperation with the federal plans.

National Multimodal Facilities and Warehousing

In order to promote intermodal and Multimodal Logistics Parks (MMLPs) as a separate class of infrastructure and to encourage efforts with a national registry of multimodal facilities will be formed. It will to enable price discovery, ensure optimal utilisation, and support planned development, the National Grid of Logistics Parks and Terminals. Furthermore, the government has begun to devise certain standards and guidelines that will be implemented for the development of warehousing. The government plans to optimise procedures for obtaining clearances that make the procedure of establishing warehouses more efficient, along with setting up a system for rating and certifying those warehouses for excellence.
The Logistics division has designed a digitisation initiative to provide an integrated IT foundation that would boost productivity, reduce wasteful travel and provide a slick user experience. The standards for the National Logistics Platform (iLOG) are currently being finalised in conjunction with the Ministry of Electronics and Information Technology (MEiTY).
The iLOG will work to integrate a single platform for the various IT solutions that have been developed by various stakeholders, including logistics service providers, purchasers, and central and state government agencies such as customs, Directorate General of Foreign Trade (DGFT), railways, ports, airports, inland waterways and coastal shipping.

National Logistics Workforce Strategy

For the integrated skill development of professionals in the logistics sector, the government is developing a national logistics workforce strategy. Building on the framework of skill development centres already in place, which are currently based on modes of transportation, it is planned to enable cross-sectoral exchange of ideas and best practices as well as create a workforce of professionals who will be the primary force behind the development of logistics in the nation.
The approaches include a coordinated effort to analyse and address present and future skill needs, mainstreaming logistics education and training in regular formal education from school through post-graduate level, and introduction of a Certified Logistics Professional (CLP) scheme, and to incentivise the engagement of such professionals. The Driver Employment and Empowerment Programme is one of the strategies, and it aims to lower logistics costs by making truck driving a desired career due to the severe scarcity of truck drivers.

Parivahan Portal

Earlier, different states have different policies regarding the processing of basic documents like Registration Certificate (RC) and Driving License (DL). The Government wanted to standardize processes across PAN-Indiato make sure that correct data can easily be shared between systems irrespective of their location. Hence, the ministry launched two software – SARATHI for driving license processes and VAHAN for vehicle registration. SARATHI offers services like Common Service Centre (CSC), E-Payment Gateway & State Service Delivery Gateway (SSDG) and VAHAN offers services like fitness, permit taxes, and registration.
All these services are offered in one mobile app called mParivahanwhich makes it easy to get information regarding RC, DL, etc. There is also an SMS alert service to constantly notify the user.

Introduction of E-Way Bill

Basically, E-way bill is an electronic document, generated from the E-way site, that is required to be carried by a person carrying a truckloadworth more than Rs. 50,000. The E-way bill is issued by registered suppliers transferring goods from one state to another. Its validity mainly depends upon the shipment distance.
E-Way bill helps in the elimination of state boundary check posts and physical paperwork which facilitate vehicles’ movement across the statesand reduce their overall turnaround time. Over the last few years, it is proved to be one of the best initiatives taken by Indian Government.

Development of Multi-Modal Logistics Parks in India

Multi-Modal Logistics Park (MMLP) is a freight-handling facility and to be constructed in a minimum area of 100acres providing access to different modes of transportation. MMLP also provides storage solutions like mechanized warehouses and cold storage with other services like customs clearance and quarantine zones.
The Indian transport ministry is currently planning a network of 35MMLPs around different Indian states. These parks will help reduce freight & warehouse costs, and vehicle congestion.

PM Gati Shakti- Logistics division

Prime Minister Narendra Modi launched the 100 lakh crore project, Gati Shakti NMP in October 2021 with the aim to achieve growth in the logistics sector by increasing the multimodal connectivity and decreasing logistics cost. In the logistics division, the focus is mainly on seamless transportation of goods by smoothing the process and supply chain connectivity that is driven by airports, roads, railways, mass transport, logistics infrastructure and waterways providing efficient and effective deliveries.

New warehouse policy

The New Warehouse Policy is a Public Private Partnership initiative that focuses on ease of transportation, streamlining the process and logistics cost reduction by developing exclusive warehousing zones across the country in order to make the storage, supply and delivery of goods hassle free.

Gati Shakti Programme

Taking its efforts toward improving the logistics sector, in 2021, the government introduced the PM Gati Shakti National Master Plan for Multi-Modal connectivity to various Economic Zones. The transformative approach toward economic development and sustainability is dependent on the railways, roads, ports, waterways, airports, mass transport, and logistics.
The plan will achieve economic transformation, seamless multimodal connectivity, and logistics efficiency with technology adoption and speedier implementation.

Conclusion

The Indian logistics industry is clearly spurred by a chain of policy changes and infrastructure upgrades. The sea of changes in the sector began with reforms like GST and the e-way bill. Furthermore, the development of support infrastructure is improving connectivity.
There is an overall shift in how the sector is perceived as a specialised function, not just as transportation or warehousing. The logistics market, currently at $250 Bn is expected to grow at 10-12% CAGR to $380 Bn by FY25 with pick up in demand. It will further improve India’s competitiveness. Effective implementation of the policies would help provide an impetus to trade, enhance export competitiveness.

Must read:

PM Gati Shakti: https://www.iasgyan.in/daily-current-affairs/pm-gati-shakti

National Logistics Policy: https://www.iasgyan.in/daily-current-affairs/national-logistics-policy#:~:text=National%20Logistics%20Policy%20is%20a,of%20the%20entire%20logistics%20ecosystem.

https://www.thehindu.com/business/Industry/15-states-among-achievers-in-logistics-performance-index-2022-says-report/article66005447.ece