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Ever since the government realised that India’s average logistics cost is almost double than that of advanced economies including the US, Japan, and Singapore, it is encouraging development in the logistics sector. The National Logistics Policy is one such initiative that will help reduce logistics costs for businesses by developing of Multimodal Logistics Parks or MMLPs and improve India’s logistics services and infrastructure.
Development of logistics parks in India is still in it nascent stages. The government of India published a tender for developing an MMLP near Chennai and Reliance Industries Ltd won the tender. There are other government tenders announced for MMLPs in other states as well. With the complete development of logistics parks, India is hoping to decrease logistics expenses from 14% of the GDP to 8%.
What is a logistics park?
A logistics park, also called a multi-modal logistics hub, is a physical destination where multiple logistics companies can execute logistics operations, transport and distribute goods. These parks are designed to be well connected to major roads and railway stations to reduce the cost of goods transport.
The logistics park concept is based on:
- Improvement of transport quality
- Improvement of logistics infrastructure
- Inter-modal development
- Reduction in logistic costs
What are the major activities carried out in logistics parks?
Logistics parks are equipped to host facilities to execute all logistics tasks at a third of the current logistics costs. Here are the activities that can be handled in an MMLP.
- Warehousing (conventional/ cold storage/product specific)
- Distribution logistics
- Inter-modal transportation
- Related activities like assembly, industrial and commercial activities including hotels, food parks, etc.
- Value added services like custom clearance
Logistics park design
As mentioned, logistics parks have good rail/road connectivity and are situated close to national highways, main rail routes, airports and seaports. It will also be close to major manufacturing zones. These parks will also feature an integrated transportation terminal for intermodal transport.
Given below are the essential components of a logistics park:
- Large area of land at a suitable location
- Warehousing including temperature-controlled storage facilities
- Facilities like storage, re-processing, packaging, unitisation, labeling, etc., for enabling value added services
- Open stock yards
- Rail terminal
- Air cargo complex
- Intermodal container terminal
- Food processing zones
- Ancillary facilities like IT parks, health/recreation, hotels, business centers, etc.
Benefits of logistics parks
Logistics parks are dedicated logistics spaces designed to reduce the distance travelled for delivering goods across the country and overseas. Here are some benefits of logistics parks:
- Reduced transportation costs
According to Ministry of Road and Transport Highways (MoRTH), logistics parks will drive a 10% reduction in transportation costs by enabling freight movement on bigger sized trucks and rail. Larger-sized trucks have 60% lower freight cost on a per ton per km basis compared to smaller sized trucks. Also, freight cost by rail is 45% lower on a per ton per km basis compared to average road freight cost.
- Customised solutions for warehousing and distribution needs
Logistics parks will have a warehousing and distribution solution according to the specific need of the business.
For example, if a pharmaceutical company wants cold storage at a specific temperature for their medicines, the park will have a dedicated storage facility that provides cold storage solutions. The park will also have a facility that enables them to transport the drugs at the specified temperature to the end point.
- Convenient intermodal transport
Intermodal connectivity is one of the important features logistics parks are offering. Closer to the national highways improve the regional connectivity from logistics parks. This can especially help the companies’ selling products for customers in tier 2 and tier 3 cities.
- Reduction in overall traffic congestion and pollution in the city area
Increased freight movement on bigger sized trucks and rail will result in a significant reduction in freight vehicles on the road. This massively reduces the number of trucks carrying goods leading to less congestion from logistics trucks. According to MoRTH, there will be a 12% reduction in CO2 emissions if bigger sized vehicles are as they have lower fuel consumption per ton per km.
Are there any logistics parks in India?
Currently there are no logistics parks in India. As mentioned earlier, RIL was the first to win a government tender for developing a logistics park near Chennai. There are other government tenders announced but the news reports say that the government is struggling to find investors for these projects. However, the central and state government have announced various schemes for developing logistics parks.
Here are the locations of upcoming logistics parks in India planned by the government as a part of the Logistics Efficiency Enhancement Program (LEEP) launched in 2017:
- Delhi – NCR (Delhi, Gurgaon, Ghaziabad, Faridabad, Noida)
- Mumbai (Mumbai, Mumbai Suburbs, JNPT, Mumbai Port, Raigad District)
- North Gujarat (Ahmedabad and Vadodara)
- South Gujarat (Surat and Bharuch)
- South Punjab (Ludhiana, Sangrur, Patiala)
- North Punjab (Amritsar, Jalandhar, Gurudaspur)
From this list, the logistics park in Delhi is supposed to be the biggest according to the plan drawn up by MoRTH. The land is planned to be a whopping 835 acres with an estimated total project cost of ₹6321 crore.
What is the National Logistics Policy of India?
Launched in 2022, the National Logistics Policy’s objective is to create a strong, cost-effective, technologically enabled and integrated logistics ecosystem in the country. Developed by the Commerce and Industry Ministry, the policy seeks to open the door for India to develop into a logistics powerhouse and increase the country’s ability to compete internationally.
Here are the major steps under the policy:
- Integrated digital logistics systems (IDS) for digital integration of different systems of departments including road transport, railways, aviation, commerce ministries and foreign trade.
- System improvement group to oversee all logistics-related projects regularly.
- Unified Logistics Interface Platform (ULIP) for shorter and smoother cargo movement and real-time data updates.
- Ease of Logistics (ELOG) to ensure the ease of logistics business through transparency and accessibility.
The primary goal of the National Logistics Policy is to lower the logistics costs from its current 14% of GDP to less than 10% and overcoming the highly fragmented nature of India’s logistics industry.