Better logistics is a prime requirement of a modern economy with a complex supply chain. Logistics covers all that takes place between producers of various components and producer of the final product and between the latter and the final consumer. It is more than just transportation, but road transportation is perhaps the most important component of the logistics sector in India. Thus, improving the efficiency of transportation would go a long way in improving the efficiency of the logistics sector.
With an average speed of 20 to 25 km per hour, a vehicle on Indian roads covers 250 to 400 km in a day. In developed countries, the distance covered could be significantly higher - about 700 to 800 km in a day. Thus, vehicles in India cover only 80,000 to 100,000 km in a year; in the US, they cover up to 400,000 km. Of course, poor road conditions and old vehicle fleets are important reasons for this differential. But delays at toll booths and checkpoints also contribute a significant part.
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Better alignment of policies across states and between the states and the Centre and institutions, plus the innovative use of technology can cut down these delays significantly.
Cash to electronic toll collection
Toll roads are a practical way of mobilising resources for building better roads and maintaining them properly by applying the "user pays" principle. Compared to China, which has used such toll roads extensively for building and maintaining highways, such roads are still limited in India. But given their planned rapid expansion, it is imperative to remove the serious problem of congestion and delays at toll plazas by the introducing the readily available technology of electronic toll collection (ETC). ETC allows tolls to be collected while the vehicles move through the toll plaza, without even perceptibly slowing down.
The recommendations of the Nandan Nilekani committee to consider the most appropriate ETC technology for national highways were received as far back as mid-2010 and were accepted for implementation in September 2011. Their implementation should be expedited. In this context, it is also important to remember that the committee had pointed out the importance of having a proper legal framework for suitable handling of violators. No information is available in the public domain on progress on this legal aspect.
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Checkpoints, physical verification
Travelling from Bangladesh to India by road, people complain about the long queues of trucks at border crossings at Akhaura-Agartala and Benapole-Petrapole. But even across India, the queues of vehicles at the border between two states look similar. They give a feeling of crossing international borders.
There are checkpoints along the national highways within the territory of every state and at its border. Two-fifths of the time lost on roads is, according to one estimate, due to stoppages at state borders. Imagine the problem of a truck passing through multiple states while carrying goods from Assam to Maharashtra!
Physical verification of road permits and waybills at checkpoints, administrative delays due to paperwork and entry barriers at multiple locations including across states and into various locations are major sources of inefficiency of the road transportation sector. These prevent companies from maintaining "just-in-time" inventories, and reduce competitiveness by increasing costs. States stop vehicles to verify the necessary documents such as road permits and waybills and to prevent leakages and evasion of taxes.
Some simple steps can make life easy for transporters. Take the case of road permits required for domestic transportation across states, both inward and outward. The forms differ from state to state not only in format but also in their number. The number can be as varied as Form 16 and Form e-VAT XXVI-A! The enormous, amazing and, frankly, incomprehensible diversity adds significantly to the compliance cost, delays and risks of poor governance.
Much will be gained by states learning from each other, incorporating the best practice and standardising the form, without detracting from their powers granted by the Constitution. Furthermore, with a move from origin-based value-added tax (VAT) to destination-based goods and services tax (GST), states can consider relaxing the requirement of road permits for outward transportation.
The myriad problems with the current indirect taxation regime and the advantages from the introduction of the GST are too well known to merit repetition. The introduction of GST will significantly help in realising the long-cherished dream of a unified Indian market. And, no doubt, it should be expedited. But the GST may not necessarily end all the problems associated with stoppages along highways or at borders. With the GST as the most important own-tax of states, without mutually binding agreements among the states and the Centre, such stoppages may continue as anti-evasion measures.
The anxiety of individual states is unlikely to disappear after the GST is implemented. Physical interface between tax officials and taxpayers will continue to lead to inefficiencies at best, and misuse of powers and corruption at worst.
Fortunately, there is a solution that has been adopted by 68 countries and the European Union for international transportation by roads, namely the TIR or Transports Internationaux Routiers (International Road Transport) Convention that concluded in Geneva more than 40 years ago on November 14, 1975. It can be adapted for transportation across states in India.
Under the TIR, a vehicle remains sealed throughout the journey and is generally not inspected at border crossings, except randomly or if an irregularity is suspected. Consignments are sealed at the origin by the relevant Customs authority and technical specifications apply to the construction of load compartments or containers. Authorised vehicles carry large blue-and-white TIR plates. The International Road Transport Union (IRU) prints and distributes the so-called TIR Carnet, which serves both as international Customs document and proof of guarantee. The Customs duties and taxes at risk throughout the journey are covered by an international guaranteeing chain managed by the IRU.
Pakistan acceded to the TIR Convention on July 20, 2015. China is in an advanced state to accede. There appears to be a lot of merit in India joining the Convention with some reservations, if necessary. In any case, lot can be gained by Indian states having their own TIR Convention.
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