[Opinion] Driving Synergy | Leveraging GST to Achieve the Objectives of National Logistics Policy

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  • Last Updated on 9 September, 2023

National Logistics Policy

Sachin Sharma & Rahul Jhawar – [2023] 154 taxmann.com 125 (Article)

The holistic and comprehensive growth of various sectors within an economy plays a pivotal role in the overall development of a nation. Among these sectors, the logistics sector stands as a cornerstone, facilitating the efficient movement of goods and materials. By encompassing a wide range of supply chain activities, this sector orchestrates the transportation of goods from origin to destination, includes warehousing and storage solutions, and ensures their timely delivery. Moreover, the logistics sector is responsible for generating numerous direct and indirect employment opportunities, further bolstering economic prosperity.

The Indian logistics sector, often deemed as the lifeline of the economy, holds a significant position, contributing approximately 14.4% to the GDP. Fueled by the explosive growth of e-commerce and hyperlocal delivery, alongside technological advancements, the logistics sector in India has witnessed steady progress. Furthermore, the government’s ardent support for an Aatmanirbhar Bharat and promoting indigenous ‘Made in India’ products have further propelled this growth. However, beneath the surface lies a harsh reality — the exorbitant logistics costs in the country present one of the most formidable challenges in realising the vision of an Aatmanirbhar Bharat. Currently accounting for around 13% of the GDP, these high costs render Indian-made products less competitive in the global markets, significantly impacting exports. The World Bank’s Logistics Performance Index ranking India at the 38th position comes as no surprise, highlighting the pressing need for substantial advancements in the logistics sector to reduce costs and unleash its full potential.

Government initiatives

Intending to reduce exorbitant logistics costs and enhance India’s global logistics performance index ranking, the Indian government introduced the highly anticipated National Logistics Policy (NLP) in September 2022. The overarching objective of this policy is to catapult ‘Made in India’ products to international competitiveness in terms of cost-efficiency. Representing a transformative framework, the policy’s key building blocks lay the foundation for comprehensive reforms within the logistics sector. The fundamental pillars that underpin this landmark policy, poised to reshape logistics operations across the nation, are as follows:

  • Digital integration system: This initiative involves the seamless digital integration of seven diverse departments encompassing road transport, railways, aviation, shipping, etc., resulting in an optimised logistics ecosystem with enhanced efficiency.
  • Unified logistics interface platform: This initiative entails the consolidation and integration of all digital logistics services into a unified platform, simplifying operations for logistics firms, importers, and exporters alike.
  • Ease of logistics (ELOG): This initiative guarantees streamlined logistics operations through enhanced transparency and accessibility, empowering the industry to address operational challenges directly with government agencies for prompt resolutions.
  • Logistics human resources development and capacity building: This involves development of a comprehensive human resource strategy and implementation of diverse action plans to enhance skills within the workforce and cultivate internal capacity to address challenges within the sector effectively.
  • Comprehensive logistics action plan: The comprehensive logistics action plan comprehends a diverse array of components, including integrated digital logistics systems, standardisation of physical assets, benchmarking of service standards, and the establishment of logistics parks, among other initiatives.

In addition to these endeavours, the government is actively pursuing various previously launched initiatives to empower and fortify the logistics sector. These involve a range of measures aimed at fostering growth, efficiency, and innovation within the industry. Some of those measures include:

  • PM Gati Shakti Yojana: Launched by the government in the preceding year, this initiative endeavours to synchronise the planning and implementation of infrastructure projects across the country, with the primary objective of reducing logistics costs.
  • Bharatmala project: “American roads are not good because America is rich, but America is rich because American roads are good” is a well-known quote attributed to John F. Kennedy, the 35th President of the United States5. Recognising the pivotal role of road and highway infrastructure, the government of India is actively engaged in the ambitious Bharatmala project. This transformative initiative aims to establish a robust network of roads, highways, and expressways spanning the length and breadth of the country.
  • Sagarmala project: To unleash the latent potential of waterways, the government launched the Sagarmala project to boost the performance of the logistics sector in the country.

The NLP, combined with the aforementioned government initiatives, is poised to deliver a significant impetus to the logistics sector, addressing its needs and fueling its growth.

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