National Logistics Policy An Economic Booster
The National Logistics Policy (NLP) aimed at developing a technologically enabled, integrated, cost-efficient, resilient, sustainable, and trusted ecosystem for accelerated and inclusive growth, is giving a push to real estate and infrastructure. Vinod Behl
For the past 8 years, the Modi government had been working relentlessly towards improving connectivity through systematic infrastructure development with trailblazing schemes like Bharatmala and Sagarmala. However, high logistics costs have been a hurdle for economic growth. In the works for the last 3-4 years, the NLP has been designed to complement PM Gati Shakti Plan to maximise its impact for speeding up economic growth.
NLP has three basic targets: reduce the cost of logistics and be comparable with global benchmarks by 2030, improve the Global Logistics Performance Index ranking; and create a data-driven decision support mechanism. The target is to place India among the top 25 nations by 2030 - up from the 44th ranking of 2018.
In a country like India, where road transport forms the backbone of logistics, integrated infrastructure under NLP will enhance seamless connectivity across all modes of transportation, and connected infrastructure will usher in cost-efficiency. NLP, combined with Gati Shakti, is set to bring down logistics cost to single digits from the current high 13-14% of GDP. At the same time, digitisation and Unified Logistics Interface Platform (ULIP) will enhance cargo movement with better accessibility of available data.
Investments, besides warehousing and manufacturing are a major driver of the logistics and industrial segment. Significant investments from domestic and global investors are coming in logistics and warehousing. Furthermore, $1.4 trillion Gati Shakti Investment, supporting Logistics Infrastructure and massive investments into Atam Nirbhar Bharat Programme, according to Rahul Pandit, CEO, Horizon Industrial Parks, will be a major support to NLP to drive logistics.
India’s move towards becoming a global manufacturing hub will be a key driver in accelerating the development of logistics, according to Arindam Guha, Leader & Partner, Government & Public Services, Deloitte India. He believes that a mix of additional infrastructure investments through National Infrastructure Pipeline and prioritisation of projects through Gati Shakti Initiative would give a thrust to logistical efficiencies.
NLP will spur the growth of commercial real estate including warehouses and industrial parks across both established and emerging logistics parks. In 2021, warehousing space saw net absorption of 39.2 msf, surpassing 2020’s absorption level of 22.1 msf as well as the level of 36.3 msf registered in the pre-pandemic year of 2019. Considering the impending transactions, the net absorption of warehousing space is set to touch 42.5 msf in 2022. The boost to warehousing will in turn push retail. Since NLP will considerably cut down the transportation cost, it will thus result in the reduction in the cost of building materials thereby making real estate more affordable.
The path-breaking NLP that will redefine and transform the logistics sector, has many positives. But the key to its desired success will depend on effective participation of states. Many states have already formed their own logistics policies and others are in the process of doing so. For its successful implementation, not only does NLP need to complement various infrastructure programmes undertaken by the central government, especially in the transportation sector, fostering real partnerships with and among states, it will have to align itself with the states’ logistics plans.
According to Roads and Highways Minister, Nitin Gadkari, the improved mobility provided by the web of highways and expressways is expected to spearhead the change, lowering logistics cost to below 10%. A multimodal approach of including roadways, railways and airways is the effective way forward in this direction. According to experts, this is to be achieved through reorganising the multimodal mix of freight movement, raising the current share of freight movement through railways from 28% to 40%.
Currently, roads have a dominant share of 60% in freight movement in India. In efficient economies, modal mix is just the reverse of India.- 50-55% railways and 25-30% roads. The upcoming Dedicated Freight Corridor will help raise the share of railways freight. And as a whole, NLP will facilitate the transformation of modal mix to focus more on railways, taking NLP on a successful path.
Industry Speak
The progressive road map of the policy to accomplish seamless last mile connectivity with an integrated platform and approach will scale up India’s global manufacturing hub, boosting industrial real estate. The multi-modal logistics corridor launched last year will help cut logistics cost to GDP to nearly 8%, making India globally competitive. The improved time and cost efficiencies, together with inter-ministerial collaboration to elevate ease of doing business, will provide a big push to real estate and infrastructure sector.
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The much-needed National Logistics Policy is in line with the PM Gati Shakti Plan. It is expected to increase the pace of growth in the logistics and warehousing segment by way of integration of supply chains.
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One of the most important policies, the National Logistics Policy is a fine example of inter-ministerial collaboration. This policy will further help integrate the supply chain, making it more efficient, driving down logistics and inventory costs, besides reducing bottlenecks to make it more agile and responsive. The Multi-Modal Park, which identifies 35 locations, covering the length and breadth of the country, will be instrumental in creating new centres of growth.
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The newly announced National Logistics Policy (NLP) assumes significance as it stands on the dynamic pillars of co-operative federalism, where all logistics stakeholders come together to ride technology platform like ULIP and e-Log to reduce redundancy, increase speed and efficiency to be globally competitive.
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The coming together of seven ministries under Nation Logistics Policy, will directly benefit key sectors like manufacturing, transportation, warehousing, and exports. With LEADS (Logistics Ease Across Different States) and Ease of Logistics (E-logs), the movement of goods will be faster and all industries including real estate will derive commercial benefits.
NBM&CW October 2022
