National Logistics Policy A Game-changer

The Indian economy and equity markets are both in a sweet spot. Within the sphere of Indian economy, if there is any sector that has caught investors’ attention recently, it has to be the logistic sector post the announcement of the National Logistics Policy. Mandar Wagh discusses in detail the contours of the policy and highlights some of the outperforming stocks in the logistics sector in India 

The logistics sector in India is suddenly the most happening sector post the announcement of the National Logistics Policy. The noble target and vision of the policy tells us a lot about what to expect from the new India under the leadership of Prime Minister Narendra Modi. For investors it is important to understand the details of the National Logistics Policy and then derive some of the most promising investment ideas that can create wealth for the investors in the long term.

Outline, Vision and Targets

Logistics efficiency is a function of infrastructure, services such as digital systems, processes and regulatory framework as well as human resources. The launch of PM Gati Shakti National Master Plan (NMP) for multimodal connectivity infrastructure to various economic zones is a transformative approach for improving logistics efficiency and reducing logistics cost while aiming to integrate the existing and proposed infrastructure development initiatives of various agencies to ensure first and last mile connectivity for seamless movement of people and goods. The PM Gati Shakti National Master Plan covers development of integrated infrastructure and network planning to be addressed for efficiency in services and human resources. 

This is the next logical step that comprises the National Logistics Policy (NLP). The NLP will function with a vision to develop a technologically enabled, integrated, cost-efficient, resilient, sustainable and trusted logistics ecosystem in the country for accelerated and inclusive growth. It has fixed targets to be achieved which include reducing the cost of logistics in India so as to be comparable to global benchmarks by 2030, an endeavour to be among the top 25 countries by 2030 in the Logistics Performance Index ranking and create data-driven decision support mechanism for an efficient logistics ecosystem. 

Policy Implementation

The policy will be implemented through a Comprehensive Logistics Action Plan (CLAP). The interventions covered under the CLAP are divided into areas like: 

◼ Integrated digital logistics systems: Developing a system of unified logistics interface to connect multiple data sources and develop cross-sectoral use cases for logistics stakeholders.

◼ Standardisation of physical assets and benchmarking service quality standards: Enhance interoperability, minimise handling risks, undertake process optimisation and improve ease of doing business through standardisation of physical assets and benchmarking of service quality standards in logistics.

◼ Logistics human resources development and capacity building: Develop a broad logistics human resource strategy and under its guiding principles place ministries to develop action plans to address skill development-related and internal capacity-building summons in the respective sector.

◼ State engagement: Provide support for development of state or city level logistics plans, set up institutional framework to act at city or state level, measure and monitor action by states and rank them.

◼ Export or import logistics: Paying attention to infrastructure and procedural gaps in India’s export-import connectivity and create efficient and reliable logistics network with clear and streamlined cross-border trade facilitation for more enhanced trade competitiveness and deeper integration of India with regional and global value chains. 

◼ Service improvement framework: Improving regulatory interface to enable seamlessness between sectors, promote standardisation, formalisation, interoperability as well as eliminate fragmentation in documentation, formats, processes and liability regimes along with reducing gaps in regulatory architecture.

◼ Efficient logistics: Sectoral Plans for Efficient Logistics (SPEL) aligned with PM Gati Shakti will be developed for each sector with underlying philosophies of interoperability, resiliency, sustainability and innovation.

◼ Facilitation of development of logistics parks: Logistics parks are hubs for intermediary activities in the supply chain connected by a transportation network. It is envisaged to take steps to facilitate development of logistics parks including guidelines to facilitate development of logistics parks in the country with focus on encouraging private investment and create a network of logistics parks by mapping them on the PM Gati Shakti NMP for enhanced visibility, improved logistics efficiency, optimum utilisation and connectivity. 

Warehousing Standards

In the warehousing value chain, standardisation is becoming essential for reduction of costs, more efficiency and confirming global compatibility along with competitiveness. The expertise from the private sector is likely to benefit based on usage pattern and the market can be segregated into single and co-warehousing segments. The private domain is dominated by co-warehousing segment, which is expected to witness significant growth in the market through 2025 owing to increasing demand for last mile distribution and growing preference for co-warehousing among manufacturers, suppliers, logistic companies and start-ups. 

Logistics Ease Across Different States

The Government of India is focusing on developing a robust and cost-efficient logistics ecosystem. To fulfil this vision, the logistics division of DPIIT, Ministry of Commerce and Industry undertakes an annual Logistics Ease Across Different States (LEADS) survey in all states and union territories to assess and suggest various improvements in the logistics sector of the country. The LEADS survey considers the viewpoints of various users and stakeholders across the value chain to understand the ‘enabler’ and ‘impediments’ to logistics ecosystem in the country. 

The outcomes covered by LEADS include:

State and UT Governments — It encourages states to make the logistics sector a priority on their list and establish an institutional mechanism for logistics. It also forces the states to take proactive policy initiatives in the form of state logistics policy and plans. 

Private Stakeholders — LEADS will serve as a platform to interact with private stakeholders via associations, traders, shippers, logistics companies, transport companies, etc. and cater to their issues with respect to logistics so as to make the overall logistics ecosystem much more responsive and healthier. 

Cooperative Competitive Federalism —LEADS further promotes the concept of cooperative competitive federalism where states and UTs not only learn from one another but also imbibe a competitive spirit to accelerate initiatives and development in the logistics sector. 

Unified Logistics Interface Platform (ULIP) and its Benefits

To achieve self-reliance in the logistics sector, the Unified Logistics Interface Platform (ULIP) has been identified as a promising initiative that has been conceptualised to provide an integrated platform that can be effectively utilised by the stakeholders to enhance efficiency, utilise technology and reduce the cost of logistics in India. As per the vision of Prime Minister Narendra Modi, ULIP was identified as one of the seven initiatives under the ‘Technology Commons’ initiative which leverages technology in specifically identified priority areas by developing world-class products and services incorporating key user and stakeholder requirements. 

Stakeholders will directly or indirectly benefit from the ULIP as follows:

◼ The government authorities will benefit as ULIP will act as a planning tool for prioritising and building logistics infrastructure. It will also provide robust information and process structure to improve international competitiveness. Support to inter-ministry and inter-agency collaborations will be promoted for ease of doing business and this will also assist in better coordination between the stakeholders, which would encourage optimised utilisation of various modes of transportation available.

◼ The shippers and consignees will benefit from informed decision-making and ‘just in time’ inventory management, real-time process and cargo movement and identification of cheaper logistics.

◼ With transparency and visibility, truckers shall be able to reduce empty movement and waiting time, thus reducing the operations and maintenance cost.

◼ The logistics service providers will be able to support stakeholders for simplification of the tedious documentation process and enable various value-added services to end-customers. It will also help in facilitating stakeholders for information-driven pricing strategy, cost and labour optimisation. 

Mahendra Shah
Chairman and Group Managing Director, V-Trans (India) Limited

" This much-needed push for the logistics sector is finally seeing the light of the day. India is projected to become the fifth-largest economy in the world. The Narendra Modi-led government will empower the sector further with this policy and this will surely make Indian logistics more competitive in relation to its global counterparts. Out of all the strategic and aspiring initiatives in the policy, I am more excited about the difference that MMLP and ULIP will bring. Players with a progressive mindset, technological inclination and competitiveness will be immensely benefited in years to come from the National Logistics Policy."

Umesh Revankar
Vice Chairman and Managing Director
Shriram Transport Finance Company Limited

"This policy is a good example of inter-ministerial collaboration which will integrate the supply chain, thus making it efficient and driving down the logistics and inventory costs while reducing bottlenecks to achieve the indented goal of making manufacturing in India an attractive proposition. The multi-modal logistics park, which identifies 35 locations covering the length and breadth of the country, will be instrumental in creating new centres of growth. We believe such steps could significantly improve logistics connectivity across the country and in turn lead to higher demand for commercial vehicles and their financing too. The policy will give a boost to the entire transportation ecosystem and aid in the growth and expansion of MSMEs spread across the country and in turn positively impact the credit off-take of the segments."

Dashboard for Ease of Logistics Services

The service improvement framework of the National Logistics Policy’s efficiency is a function of infrastructure, services such as digital systems, processes and regulatory framework and human resources. PM Gati Shakti, a transformative approach for improving logistics efficiency and reducing logistics cost, has been launched for integrated infrastructure development in the country. For a holistic approach to logistics’ efficiency, the National Logistics Policy 2022 (NLP) proposes to establish a services improvement framework for:

◼ Improving regulatory interface to enable seamless handshaking between logistics sectors.

◼ Promote standardisation, formalisation and interoperability streamline fragmentation in documentation, formats and processes as well as reduce gaps in any existing regulatory architecture. 

Performance of Logistics Stocks

Recently, the Indian logistics industry has undergone some significant changes. It is continuing to evolve and these changes are likely to last for the foreseeable future. Extracting data for the performance of logistics companies, the returns from logistic companies have climbed up to 350 per cent on YTD basis. Around 45 per cent of the companies from the extracted data have delivered positive returns in 2022, so far. The shares of Ritco Logistics and Prime Fresh have bagged multifold returns. 

The elevated pace of digital transformation is redefining Indian logistics. Automation, artificial intelligence, machine learning, data analytics, and the Internet of Things (IoT) contribute substantially toward increasing operational efficiency which is making it one of the fastest growing sectors in the country. This shows that the sector has huge potential for growth in the near future. With the launch of platforms like Unified Logistics Interface and ELOG, the National Logistics Policy holds potential to boost prospects for almost all segments in the logistics space. Various government initiatives and key strategies will drive the growth of the logistics sector. 

Conclusion

Several companies belonging to the logistics sector in India are seen outperforming the markets in 2022. The ambitious National Logistics Policy is a fresh trigger for the sector and investors should attempt to include the most promising stocks from the logistics sector in their long-term strategic portfolio. The logistics sector is the key to India’s success story. The much talked about China+1 is expected to work in favour of the Indian manufacturing sector and the logistics sector is expected to play a key supportive role to both the manufacturing sector in India and the infrastructure sector. No investor who is bullish on the India story can afford to ignore the logistics sector over the coming years.