The Aakhya Weekly #16 | Fixing India's Logistics Woes
The Aakhya Weekly #16 | Fixing India's Logistics Woes
In Focus: National Logistics Policy Launched
Logistics, in India, is exorbitantly expensive. Logistics costs hover around 13-14% of our GDP, compared to the 7-8% of GDP that is the norm in most developing economies. These costs bleed into the everything made or sold in India. They contribute to the prices of goods in our markets, and make India less competitive globally.
Noting these issues, a short while ago, the Government launched its ‘PM GatiShakti National Master Plan’ (PMG-NMP), a plan around super-charging infrastructure development across the country.
On Saturday, Prime Minister Narendra Modi announced the ‘National Logistics Policy’, which intends to bring technology and process-based efficiencies to the logistics sector, complementing the PMG-NMP’s infrastructure development. By 2030, it intends to bring down Indian logistics costs in line with global benchmarks, aspiring to reach the top 25 countries in the Logistics Performance Index rankings. It also aims to create a data-driven decision support mechanism for the sector.
The policy carries a detailed roadmap to achieve its goals, dubbed the ‘Combined Logistics Action Plan’ (CLAP). The CLAP defines eight action areas for the Government to target. These revolve around: (a) streamlining demand-side logistics processes, (b) creating infrastructure in the form of logistics parks, (c) improving industry and regulatory processes, (d) linking different government departments digitally, (e) creating standard industry benchmarks, (f) creating skilled manpower to staff logistics projects, (g) eliminating inefficiencies in imports and exports, and (h) creating the means to measure and improve states’ performances on logistics.
It is, of course, too early to call the policy a success. Many well-intentioned logistics-oriented policies have, in the past, failed to take off because of poor implementation and bureaucratic hurdles. The policy does, however, take aim at several core inefficiencies in Indian logistics. For one, it aims to eliminate the monumental red-tape involved in transporting goods across the country. Through digital tools and streamlined processes, it also stitches together what is, today, a deeply fragmented market, where considerable value is lost at junctures between incompatible systems. Finally, it addresses India’s employability crisis, where the educational system fails to produce workers with the skills that the industry demands.
If implemented well, in conjunction with the PMG-NMP, the policy has the potential to revolutionise Indian logistics. Our congested roads, which currently dominate the space, may give way to rail and waterways. Costs may come down dramatically, improving India’s chances of integrating into global value chains. The policy has been met with considerable fanfare, with the industry heralding it as a game-changer. One hopes that this enthusiasm is borne out by its results.
Finshots, as always, carries an excellent analysis of the new policy. The Indian Express has published a handy explainer on the policy. The Economic Times captures raving industry reactions to the policy.
Top Stories of the Week
AALCO Annual Session hosted by Secretariat, New Delhi (26-28 Sep)
The 60th Annual Session of the Asian-African Legal Consultative Organisation (AALCO) is scheduled to be held in hybrid format in New Delhi from 26-28 September 2022. Delegations from 47 Member States, including China, Japan, and Iran, will be arriving in New Delhi to attend the Annual Session, which will be hosted by the AALCO Secretariat in New Delhi and presided over by its new Secretary-General, H.E. Dr. Kamalinne Pinitpuvadol. Ms. Meenakshi Lekhi, Minister of State for External Affairs, Government of India, has been invited as the Chief Guest for the Inaugural Session.
The provisional agenda for the Annual Session points to discussions on various key international legal issues, including environment and sustainable development with, focus on air pollution and marine biodiversity beyond national jurisdictions, as well as international trade and investment law, with discussions centered around the 12th Ministerial Conference of the WTO and the reform efforts of the United Nations Commission on International Trade Law (UNCITRAL) Working Group III.
Jaishankar Visits US for the 77th UNGA Session, Solidifies Indian Interests
India’s External Affairs Minister, Dr. S. Jaishankar is currently on a visit to the United States of America for the High-Level Week at the 77th Session of the United Nations General Assembly (UNGA). On the sidelines of UNGA session, the EAM has been engaging with various partners and regional groups. In his presence, the first trilateral Ministerial meeting of India-UAE-France took place, where discussions focused on how strategic partners and UNSC members could actively exchange ideas for improved multilateralism.
On a bilateral level, the EAM met several countries from the Global South, finding avenues for South-South cooperation. He also met with the Indonesian Foreign Minister, focusing on the upcoming G20 Summit and India’s Presidency thereafter. Beyond these bilateral meetings, EAM Jaishankar met with the international advisory board of the Atlantic Council and members of the Community of Latin American and Caribbean States (CELAC). These multilateral meetings were also focused at finding avenues for India’s growing global partnership and also taking forward India’s vision of reformed multilateralism.
India to Boost Financing for Electric Vehicles with the World Bank’s Support
The Indian Government is in talks with the World Bank to introduce a risk-sharing mechanism to compensate banks that offer loans for the purchase of electric vehicles in the country. The World Bank is said to set up a $1 billion fund in collaboration with Indian banks that would provide first-loss guarantees to lenders in case of loan defaults.
As the country seeks to decarbonize the transport sector to achieve its goal of becoming net carbon zero by 2070, strengthening infrastructure and financing become increasingly important. While the sector sees rapid policy changes and industry involvement, there is still reluctance to finance electric vehicles due to high costs of insurance and marginally low resale values. The initiative taken by the Government of India and the World Bank comes at a crucial time where the transition to electric mobility is marred by concerns with capacity, efficiency, financial viability and safety, further bolstering the penetration of electric vehicle adoption in India.
This Week in Policy
Macroeconomics and Taxation
The Finance Ministry is working on a comprehensive regime to bring cryptocurrencies under India’s goods and services tax framework. The exercise will reportedly involve defining the characteristics and legal nature of cryptocurrencies, after which a tax slab may be decided upon.
The Government is mulling over reducing duties on iron and steel exports, in response to cooling prices.
Labour
Smt. Arti Ahuja has been appointed as the new Secretary to the Ministry of Labour and Employment, in place of Sri Sunil Barthwal.
The EPFO has reported adding an additional 18.23 lakh employees in the month of July 2022, of which 10.58 lakh have come under its coverage for the first time.
Agriculture and FMCG
Kharif rice production shall fall by 6% year-on-year owing to drop in paddy acreage and poor rains in key rice producing states.
Healthcare
The Subject Expert Committee of the DGCI will soon review an application by Bharat Biotech to approve ‘Innovac’, its intra-nasal vaccine, as a booster dose for COVID-19.
The Government is finalising the introduction of ‘trade margin rationalisation’ on around 100 pharmaceutical formulations, pursuant to which the Government can cap the margins of distributors and retailers on the sale of drugs.
The Union Health Ministry has released the National List of Essential Medicines, 2022, after a seven year period. The list informs the procurement of medicines at government healthcare facilities.
Foreign affairs
During a talk at Columbia University, EAM Dr. S. Jaishankar emphasised on how the focus of Indian foreign policy is to bring ties with China ‘back to normal’. Despite this, it seems unlikely that Jaishankar and his Chinese counterpart would have talks at the upcoming BRICS Foreign Ministers’ Meeting.
India and Singapore on Saturday launched a new mechanism, the India-Singapore Ministerial Roundtable (ISMR), headed by their ministers of foreign affairs, finance and trade, to enhance economic cooperation and to identify new areas for collaboration.
Technology, Media and Telecommunications
The Department of Telecommunications published the much-awaited draft Indian Telecommunications 2022 bill. Key focus areas include spectrum allocation and OTT communications apps.
TRAI has started meetings with telecom service providers, satellite players and officials from the Department of Telecommunications, seeking opinions on satellite spectrum and the appropriate methodology to be followed for allocation.
Drafting of Data Protection Bill is almost complete, and shall be introduced in the Budget Session, says Sri Ashwini Vaishnaw, Minister of Communications and Information Technology. Amendments to the IT Rules amendment and a Digital India Act may follow.h
International trade and commerce
The directorate general of foreign trade (DGFT) under the commerce ministry has permitted invoicing, payment and settlement of exports and imports in the rupee along the lines of RBI’s recent circular in this regard, with immediate effect.
The Government of India will likely resume elaborate physical inspections of Chinese imports, in light of 34% surge of imports from China from Jan-Aug 2022 prompting suspicions of dumping.
Banking, Finance and Insurance
Monetary Authority of Singapore (MAS) and the International Financial Services Centres Authority (IFSCA) sign a FinTech Co-operation Agreement (CA) to facilitate regulatory collaboration and partnership in FinTech.
SEBI working on a new payment system for the secondary market, which could prevent brokers from accessing their client funds. The system will be in line with Application Supported by Blocked Amount (ASBA) process used for subscribing to initial public offerings (IPOs).
Manufacturing
India and Egypt sign a Memorandum of Understanding (MoU) on September 20, 2022 to develop military cooperation, focusing on defence co-production and maintenance of equipment, amongst others.
The Union Cabinet approved Production Linked Incentive (PLI) Scheme on ‘National programme on High Efficiency Solar PV Modules’ on September 21, 2022 with a provision of ₹19, 500 crore to achieve manufacturing capacity of Giga Watt scale.
The Government intends to set up an Export Promotion Council to boost the export of medical devices.
Logistics
The Government of Assam launches the Logistics and Warehousing policy of the state on September 19, 2022, focusing especially on strengthening MSMEs to achieve rapid industrialisation. The notification can be accessed here.
Sustainability
The Government is working on a plan to pool wind power bids to diversify projects across states that have the scope for it, targeting bids of at least 8 GW per year of wind energy to boost the sector.
The Cabinet approves the allocation of ₹19,500 crore for domestic manufacture of solar photovoltaic (PV) modules. It is expected to bring in an investment of ₹94,000 crore and give direct employment to 195,000 people.
Miscellaneous
The Maharashtra Government intends to establish the ‘Maharashtra Institute of Transformation (MITRA)’, a body modelled after the NITI Aayog that shall assist the Government in making informed decisions on various matters. The Chief MInister has given his in-principle approval to the project.
The Rajya Sabha shall use gender-neutral language in response to questions from its coming session.
Upcoming Events
The Arabian Sea Dialogue 2022
September 27 | Trident, Nariman Point, Mumbai
ORF is organising The Arabian Sea Dialogue 2022 at the Trident, Nariman Point, Mumbai on September 27, 2022. The Dialogue brings together policymakers, business leaders, civil society, and the youth of the region to deliberate on a blueprint for an ‘Arabian Sea Community’. The discussions will cover themes of Geopolitics and Security, Beyond Traditional Economics, India-Gulf Climate Cooperation, and Youth, Inclusion and Innovation. Harsh Vardhan Shringla, India’s Chief G20 Coordinator and Former Foreign Secretary, will be among numerous dignitaries present at the event. More Details
Unpacking the Electricity (Amendment) Bill, 2022
September 23 | CPR Conference Room, Chanakyapuri, Delhi
CPR is organising a panel discussion and open house session on ‘Unpacking the Electricity (Amendment) Bill at the CPR Conference Room, Chanakyapuri, Delhi on September 23, 2022. The Bill is India’s fourth attempt to update the electricity laws, and imply substantial shifts in electricity governance. This event will bring together energy sector practitioners, experts and civil society representatives to discuss possible implications of the proposed changes. More Information | Registration Link
4th CII Lifesciences Conclave
September 23 | The Lalit, New Delhi
CII is organising the 4th Lifesciences Conclave 2022 at The Lalit Hotel, New Delhi on September 23, 2022. While the COVID pandemic is firmly in its sunset phase, it has now become more important than ever to plan resilient systems for the middle to long term to prevent, or ably handle, another pandemic. Pharma and biotech companies are an integral part of this strategy, with the capacity to manufacture & supply medical products at unprecedented rapidity. The conclave aims to bring together stakeholders across the lifesciences spectrum to deliberate and collaborate to develop a robust, stress-tested ecosystem. More Information | Registration Link
A Few Good Reads
Justice AP Shah writes a phenomenal brief history of the Indian Supreme Court under the Modi government.
In light of the SCO summit, Brian Wong and Iskander Akylbayev examine China’s outlook towards Central Asia.
Snigdhendu Bhattacharya uncovers regional disparities as India transitions to green energy.
Amit Kapoor and Bibek Debroy make the case for planned urbanisation over the next 25 years.
Peter Leydon injects some much needed optimism in this prediction about world’s trajectory in the next 25 years.
Tweets of the Week
External Affairs Minister, S Jaishankar meets Ukrainian Prime Minister, Denys Shmyhal at United Nations General Assembly in New York:
Pranay Kotasthane briefly assesses the viability of recently announced changes in schemes catered to accelerate India’s semiconductor push:
Author and Historian, Anirudh Kanisetti dives into the archives of naval strategies surrounding the Indian Ocean:
Key Notifications
Department of Telecommunications requests comments on the draft Indian Telecommunication Bill, 2022. Comments may be sent to naveen.kumar71@gov.in by October 20, 2022.
CBDT issues revised guidelines for compounding of offences under the Income-tax Act, 1961.
Ministry of Road Transport & Highways (MoRTH) issues comprehensive reforms in the Trade Certificate to simplify and streamline the regime under the Central Motor Vehicle Rules, 1989.
Ministry of Corporate Affairs notifies Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022.
Ministry of Health and Family Welfare releases draft rules to further amend Medical Device Rules, 2017.