Govt to reduce logistics costs to 12%

Ahmad Shariq Khan & Aamir H Kaki

The Govt wants to bring down the overall logistics cost to 12%. This was revealed by Nitin Gadkari, Minister for Road Transport, Highways and Shipping during the unveiling of the 3rd edition of a report titled “Operational Efficiency of Freight Transportation by Road in India”, on Tuesday. The report was jointly published by Transport Corporation of India (TCI) and IIM Calcutta.

Speaking on the occasion he said if India does not bring down logistics costs, which currently stand at 18 percent, the country will not be able to give a competitive edge to it's exporters. He also stressed on the need to develop multimodal transportation solutions in the country.

Referring to China he said, "China's logistics cost is around 8 percent, as many of its important manufacturing hubs are close to major ports, that help its exporters to save costs. Our focus is to bring down the logistics cost from 18 percent to 12 percent by developing coastal shipping and inland waterways."

The report, is a study on road freight transportation along 28 major routes of India. The aim of the study is to discover new methods to enhance the operational effectiveness of freight transport by road. It also calls for a speedy expansion of the network of roads and broadening and improving the conditions of the existing roads by maintaining them periodically.

Vineet Agarwal, MD, TCI, said, “Freight movement by road is a key component of the Indian economy. To understand the best methods and to improve its operational effectiveness is, therefore, crucial for the country’s growth and to boost internal trade. The report attempts to find out how road infrastructure would be able to keep pace with the rising traffic and suggests major areas that need to be looked at to make sure that goods transported by road become cost-effective and speedy for the stakeholders involved,” he added.

Road transport in India plays a considerable role in its contribution to the country's GDP. While the overall contribution of the transportation sector per se to the country’s GDP was 6.5 percent in 2011-12, revenue from roads alone contributed 4.8 percent as against one percent from the railways.

A special mention that needs to be made here is that India spends a whopping $14.7 billion and $6.6 billion on extra fuel consumption costs and transportation delays, every year. The report highlights all the fields that should be taken into consideration in order to fill the gaps and reduce the humongous costs.