India spends around 14.4% of its GDP on logistics and transportation as compared to less than 8% spent by the other developing countries, said Mr. Ram Kripal Yadav, Minister of State for Drinking Water & Sanitation while inaugurating a conference on 'National Summit: Logistics India 2016,' organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
In his address, Mr. Yadav said, the building of dedicated rail freight corridors will promote efficient haulage of containerized cargo by rail. One key advantage of the dedicated freight corridor is that freight trains could be run on time tables similar to passenger trains, and the frequency can be theoretically increased to one train in 10 minutes. This will reduce time for goods transportation between Mumbai and Delhi to 18 hours from 60 hours now.
Waterways are 50% cheaper than road and nearly 30% cheaper than rail. The coastal leg, apart from being more fuel efficient, can also carry larger parcel sizes and provides a great opportunity for consolidation of loads, said Mr. Yadav.
The Government of India's ambition to replace the National Maritime Development Program (NMDP) with the more comprehensive Maritime Agenda 2010-2020 is in line with its objective to increase port capacity. It intends to encourage private investment in both major and non-major ports and bring port performance at par with international standards. Through this program, government plans to invest INR 2,870 billion in generating total port capacity of 3,200 MMT and cater to expected cargo traffic of 2,500 MMT by the end of 2020.
Over 160 airports currently fall into this category and following through on this initiative would improve regional connectivity across the nation. It is difficult to say exactly what scale of impact this will have on the logistics sector since most goods are still transported by road or rail. But we can be assured that it would only be an improvement on the existing state of things. The reach of companies operating in the logistics sphere would increase if the logistics sector sees transport by air as a viable option, said Mr. Yadav.
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The Cargo and Logistics Industry in India can expect to grow at CAGR of 16% in the coming years with inflow of new investments that in turn will create new opportunities for the logistics sector. The 'Make in India' campaign will see investments connect India to global production networks and would generate significant new business for logistics in India. This will make India an attractive location to do business as compared to others in the region.
However, this can happen only with the help of a sound and efficient infrastructure. Though India is improving on its infrastructure despite the sluggish economic growth in the last decade and emergence of large middle class market with increasing purchasing power, few sectors in India still need to catch up with rest of the world to keep pace with development taking place in rest of the world. This will help in bringing down the costs to a considerable extent, highlighted Mr. Yadav.
Going forward, the evolution of India's Cargo and Logistics Industry can be realized through uniform progress across all segments. Appropriate policy changes and opening up capacity and increasing speed with which goods are transported in all modes of transportation, especially rail and water transport, are imperative for the growth of the industry. Transportation of bulk commodities from road to appropriate modes such as rail and waterways can free up capacity for fast moving goods. Further, setting benchmarks and standards for the industry will drive uniformity of warehouses, storage and transport equipment.
Access to cheap capital should be made available to Logistics Service Providers for investments in infrastructure, enabling them to extend longer credit periods to their clients and supplementing their working capital. The government should create a uniform tax structure and do away with multiple check points and documentation requirements, which would lead to speedier delivery of cargo.
The growth of the Cargo and Logistics industry will not only contribute to the GDP, but will also generate employment opportunities.
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