Mentors Comment:

Discuss the 1st statement of teh question in your intro.

Then discuss the current status and importance of logistics sector in India.

Then mention what are the reasons for the ailment of the sector.

Briefly mention some of the recent steps taken by the GoI for the betterment of the sector.

Conclude with proper way forwards.

Answer:

India should adopt the multi-modal programme to reduce logistics costs and make the economy competitive. The strategy involves revamping India’s logistics sector from a “point-to-point” model to a “hub-and-spoke” model

Challenges in present logistics sectors
• India’s logistics and transport sector has developed in silos. This has resulted in more complex regulation and administrative procedures.
• Crucial logistics links have been missed as well as given rise to inefficient modal mix.
• Till 2008, the mix was 50% of total freight flow via roads, 36% by rail, 7.5% by pipelines, 6% by coastal shipping, 0.2% by inland waterways and 0.01% by airways. The ratios may have shifted somewhat since then but they are unlikely to have changed substantially.
• It is known that transport by rail and inland waterways is far more cost- and time-efficient than transport by roads, and thus should account for high proportions of the freight flow.
• However, lack of development of freight corridors and dedicated inland waterways has put the burden on roadways.

Significance of multimodal transport
• GST has been rollout from 1st July 2017. This will allow companies to restructure their supply chains once the domestic market is truly integrated.
• For production structure to improve radically, there is a need to build a new logistics network to allow inputs, components and finished goods to move seamlessly across the country.
• Boosting competitiveness-efficient transportation and logistics reduce transport time and costs and also reduce cost of production by minimizing the need for large inventories. This means less capital required for warehouses, insurance etc.
• Create markets-presence of transport and logistics enterprises can create markets for other goods from the present goods driven logistics network.
• Regional equal growth- efficient logistics networks can reduce divergence in regional growth. Interstate trade- As per Economic Survey 16-17, inter-state trade flows in India is 54% of GDP. This can be improved through multimodal logistics.
• Keeping up with demand- the demand for transport grew at around 10% annually in the 1990s and has accelerated since then. Failing to keep pace might hurt all the sectors of society.

India and multimodal projects:
• The Trans-Asian Railway network now comprises 117,500 km of railway lines serving 28- member countries. It aims to serve cultural exchanges and trade within Asia and between Asia and Europe.
• Indian Railway plans to set up a Trans-Asian Railway (TAR) route which is expected to play in increasing India’s connectivity to its eastern as well as western neighbours. TAR includes a 118-km railway track laid between (Manipur capital) Imphal and (border towns) Moreh and Tamu (the latter in western Myanmar).
• It comes against the backdrop of China’s ambitious “One Belt One Road” initiative aimed at connecting countries across Asia, Africa and Europe to boost trade and economic ties on the lines of the traditional maritime route.
• With TIR Convention, there will be improvement in international connectivity and movement of cargo across the countries in the multi-modal format. Goods can go from Mumbai or Kandla Port to Iran. From Iran, they can go via rail or road to Central Asia or Europe.
• The TIR Convention will also help India move goods along the International North-South Transport Corridor (INSTC)—an ambitious multi-modal transportation established in 2000 by Iran, Russia and India to promote transportation cooperation.
• India plans to develop Chabahar port in Iran, which will allow access to landlocked Afghanistan and energy-rich Central Asia through the Jawaharlal Nehru and Kandla ports. In addition, India has built a 218km-road link connecting Delaram with Zaranj in Afghanistan, which is adjacent to Iran’s border.
• India has also been instrumental in the India-Myanmar-Thailand Trilateral Highway, along with the Bangladesh-Bhutan-India-Nepal Motor Vehicles Agreement.