Govt's Initiatives To Boost Logistics Sector Will Immensely Benefit Textile Sector

Trade & Policy

Govt's Initiatives To Boost Logistics Sector Will Immensely Benefit Textile Sector

The Union government is planning to bring down the cost of logistics to 10% of GDP by 2022 from roughly 14% at present. In India, logistics cost is much higher than developed economies like the US or EU i.e. 8-9%. Reduction in logistics cost augurs quite well for the textile industry which is facing tough challenge in the global market. Indian textiles goods have not been able to compete in the global market due to lack of cost competitiveness, and experts are of the view that any reduction in cost of production owing to reduction in logistics cost will be a big boon for the industry.

"The textile industry is desperately looking out for avenues that can help reduce its cost of production and make it competitive in the global market. Our logistics/transaction cost is quite high and there is big scope to bring it down. Any attempt to bring down this cost will be a major relief to the industry. Moreover, efficient logistics is paramount for the sector which hugely depends upon exports," says Sanjay Jain, chairman, Confederation of Indian Textile Industry.

The Indian logistics sector faces challenges and there is a lot to act upon. Use of innovative models, new technological systems, international best practices, research and adequate implementation approach can all help to improve the sector, which in turn can stimulate growth and employment, says a KPMG report.

The relatively new logistics division under the Union commerce ministry has developed a plan to reduce logistics costs.

The plan involves streamlining logistics-related transactions by creating a single-window portal. This portal will handle all processes related to logistics transactions. At present, there are about 64 processes that a logistics transaction goes through. The government is conducting a study on this IT platform, and will release it soon. The logistics division will also re-examine logistics processes across government platforms.

This integrated logistics portal would serve as a transactional e-marketplace by connecting buyers, logistics service providers and the relevant government agencies such as customs, port community systems, port terminals, shipping lines, railways, etc. Once functional, it would reduce delays and facilitate a transparent, informative and convenient trading system. Recently the ministry also launched a new Logistics Ease Across Different States Index to rank states for the support they provide to improve logistics infrastructure within their respective jurisdictions.

"Logistics can be the cause of success and the reason for failure. The speed of import or export, or doing business within country, will depend on logistics. The moment you bring down the cost of logistics, the volume will increase dramatically," points out Suresh Prabhu, Commerce & Industry Minister, stressing on the need to develop the logistics sector.

A new Logistics Division has been established to coordinate integrated development of the sector by way of policy changes, improvement in existing procedures, identification of bottlenecks and gaps, and introduction of technology-based interventions. A concerted effort in collaboration with central line ministries and state governments is on to simplify the regulatory processes in domestic and export-import logistics.

"The introduction of GST and the government's move to give logistics sector the infrastructure status, will provide impetus to the industry. India's logistics cost is quite high and this significantly add to the cost of manufacturing. GST will bring down the logistics cost and thus help improve efficiency across transportation and warehousing operations," says Pirojshaw Sarkari, CEO of Mahindra Logistics.

As per the Economic Survey 2017-18, the Indian logistics sector provides livelihood to 22 million-plus people and improving the sector would facilitate a 10% decrease in indirect logistics cost, leading to a growth of 5-8% in exports. Further, the Survey estimates that the worth of Indian logistics market would be around US$ 215 billion in next two years compared to about US$ 160 billion currently. The boom in next couple of years is expected largely due to the implementation of GST.