By Aman Shah
The Ministry of Commerce and Industry has announced a plan to launch a new Digital Logistics division. This decision was undertaken by the newly appointed cabinet-level minister Suresh Prabhu. This has been the biggest announcement of this ministry since Prabhu took over. Looking at the history of the plan, the idea was initially sketched out when Nirmala Sitharaman was still in charge of the ministry in July 2017.
What is the need for the new division?
When bureaucrats looked at the international data, they found that many countries spend only 6% of their GDP on logistics for their state services as compared to India’s 13%. Developed countries like the USA, Germany, and Australia fall into the range of 8% to 9%. While South Africa—a fellow BRICs country—spends only 11.2%. This higher cost may affect India’s economic performance and competitiveness in the global supply chain adversely and may be slowing economic growth and social development in the country.
In the past, logistics was handled independently by the different ministries. Each created their own standards for handling shipping, aviation, railways and road transport. However, the Modi government has only now taken the pioneering decision to develop a separate logistics division within the Ministry of Commerce and Industries. This will be led by a team of 45 experts in Udyog Bhawan, New Delhi. It will be headed by Binoy Kumar, an experienced administrative service officer from the 1983 batch of civil service entrants.
What are the goals of the new division?
The logistics division has been established to coordinate between the different ministries and to contribute to the overall development of the nation’s infrastructure. The goal is to reduce the government’s logistics costs to less than 10% of GDP. It is hoped that this will bring the additional benefit of increasing jobs in the logistics sector to 4 crores in 2019, up from the current 2.2 crores.
The Logistics Performance Index (LPI) is a ranking tool created by the World Bank to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve. These reports have placed India at an LPI of 3.42, which compares to Germany’s top score of 4.23. The government’s new logistics division aims to raise India’s rank from 35th to 15th. The plan is to use advances in IT to enhance the logistics sector. In this way, the government hopes to reduce the waiting time for cargo imported by sea from five to three days.
How does this affect the ministerial mandates
The Ministry of Commerce is responsible for the formulation and implementation of policies aimed at developing the nation’s commercial and industrial sector. While the ministry looks after the production, distribution, development and planning aspects of specific industries, the new logistics division aims to coordinate between these industries with its own specific targets.
The Ministry of Road Transport and Highways (MRTH) is supposed to formulate and administer the rules, regulations, and laws relating to road transport, with the aim of increasing the mobility and efficiency of the road transport system. However, only 65% of the government’s logistics is handled under the MRTH. The new logistics division will have responsibility for all logistical issues, including the 26% handled by rail—currently under the Rail Ministry—and 2% by air—currently under the Civil Aviation Ministry.
Inter-ministerial meetings will be held by the logistics division to formulate a road-map to coordinate the government’s logistical systems. The new division is expected to show results by the end of 2019. The utility of this new setup will only be known through its implementation.
Featured Image Source: PxHere
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