National Logistics Policy: Sector stocks show mixed reaction

Shares of logistics companies were trading mixed in early trade on Monday after Prime Minister Narendra Modi launched the National Logistics Policy on September 17. The sector heavyweights Container Corporation of India Ltd. (CONCOR), TCI Express, Aegis Logistics, Blue Dart Express, Transport Corporation of India, and VRL Logistics rose up to 3%, while Mahindra Logistics, Allcargo, Snowman Logistics dropped nearly 1%. In comparison, the BSE benchmark Sensex climbed 261 points to 59,102 levels in the first hour of trade so far.

PM Narendra Modi on Saturday launched the national logistics policy, which intends to boost international trade and benefit all stakeholders including farmers and consumers. The objective of the policy is to develop a technologically enabled, integrated, cost-efficient, resilient, sustainable and trusted logistics ecosystem in the country for accelerated and inclusive growth. It aspires to reduce cost of logistics in India to be comparable to global benchmarks by 2030, endeavour to be among top 25 countries by 2030 in the Logistics Performance Index ranking, and create data driven decision support mechanism for an efficient logistics ecosystem.

Speaking at the event, the PM said that India is emerging as a world manufacturing hub and the new logistics policy would act as a driving and guiding force. He also pointed out that the stakeholders need to bring the logistics cost from 13% to a single digit number as soon as possible. The Prime Minister said that drone technology would emerge as an important aspect of the transport and Logistics sector, especially for remote areas.

Union Minister of Commerce and Industry Piyush Goyal said that the national logistics policy would end to silos and bring all departments and states together, in line with the holistic vision of the Prime Minister. Referring to logistics as the lifeline of the economy, the commerce minister said that the policy would give India’s logistics sector a new direction and take it to greater heights. He observed that Covid-19 had displayed the strength of India’s logistics sector in front of the world. He said that food grains and other essential items reached all people on time and we achieved new milestones in international trade.

According to industry experts, the national logistics policy will enable trade efficiencies and help Indian manufacturers to be globally competitive.

Sachchidanand Shukla, Chief Economist, Mahindra & Mahindra, said the policy is expected to play a big role in boosting the logistics sector in India. “The aim is to bring down the logistics cost from the current 13-14% of GDP to a single digit, enabling India to be at par with countries like Germany and Japan, which are known for their developed logistics infrastructure and to spend around 8-9% of the GDP on logistics,” he said. 

“The policy introduces an integrated digital system (IDS) that will bring on one platform departments belonging to ministries of road transport, railways, customs, aviation, foreign trade and commerce. The digital data of these ministries is to be integrated under IDS. This will help smoothen cargo movement and reduce logistic costs,” he added.

Sachin Agrawal, Co-Founder & CEO, Bizongo says, “As India emerges as a manufacturing hub, the National Logistics Policy will play a pivotal role in enabling MSMEs and the larger manufacturing industry achieve logistics and supply chain efficiencies. After the supply chains risks exposed by the pandemic and then the geopolitical tensions, the policy will not only promote seamless movement of goods and remove bottlenecks from supply chains but also empower businesses to boost delivery profitability, identify new revenue streams, and offer better customer experience. This in turn will reduce wastage, time, and costs and ensure India is on track with its net-zero goals.”

According to Madan Padaki, Chair - Rural Mobility, IET Future of Transport and Mobility Panel, the Unified Logistics Interface Portal (ULIP) will bring all the digital services into a single portal, so there would be seamless movement of data and all information available in one place. Besides, it would also bring in ease of logistics services, with a new digital platform taking up operational issues with the government.

According to a study by NCAER in 2019, customs clearance (5%), documentation (4%), logistics systems management (2%), administration cost (2%), insurance cost (2%), software and maintenance (1.3%), cost of logistics equipment (1.7%), marketing cost (0.8%) and IT hardware and software cost (1%) together account for nearly 20% of the total logistical cost. India aims to improve its ranking in the logistics performance index from 44 in 2018 to 25-30 and reduce logistics costs over the next five years.