Logistics Ease Across Different States, or LEADS ranking, can nudge states to undertake steps for reducing logistics cost and increase global competitiveness.
EADS, or the Logistics Ease Across Different States exercise for the year 2022 has commenced, wherein logistics service providers will be surveyed to quantitatively measure the performance of the states on logistics parameters. The exercise assumes significance in the context of PM Gati Shakti that aims to synchronise and integrate efforts at the state level to build multimodal connectivity infrastructure and improve logistics ecosystem. The inputs from the LEADS exercise will be helpful for states in channelising capital investment in infrastructure under PM Gati Shakti, for which Rs one lakh crore interest-free loan support has been announced in Budget 2022-23.
Development of an efficient, cost-effective and accessible logistics ecosystem will act as the launchpad to achieving the $5-trillion economy. It will increase the competitiveness of exports and make provision of goods domestically cheaper. The logistics cost was estimated to be $293 billion in 2016, which roughly stood at 13 per cent of GDP in that year. This figure is quite high vis-a-vis average logistics cost estimates for developed countries, which stands at around 8-9 per cent of GDP.
The logistics ecosystem is diverse. It includes transportation, warehousing, handling, packaging and allied value-added services. Given the vast expanse of the sector, there has been a lack of integrated approach in its development. This manifest itself in terms of the challenges that include piecemeal and silos-based approach in the development of infrastructure; skewed dependence on road transport in overall modal share despite it being relatively inefficient; lack of common guidelines for warehouses, logistics park and terminals; separate laws governing each mode and asynchronous glossaries among others.
While the sector is driven largely by private players with the exception of rail-based transportation, the role of the government is crucial in keeping costs low by building multimodal trunk infrastructure and undertaking regulatory reforms to unlock its potential.
In recent years, India has made rapid progress by building logistics infrastructure under various schemes — industrial and dedicated freight corridors, Bharatmala and Sagarmala projects. Several regulatory and structural reforms have also been undertaken resulting in logistics efficiency. These include introduction of GST that has reduced wait time for inter-state border crossing and setting up large warehouses; revision in axle-load norms for heavy vehicles that has increased carrying capacity of trucks; mandatory electronic toll collection system (FASTAG) for reducing time loss at toll plaza; RFID tagging for track and trace of all EXIM containers, introduction of paperless EXIM trade process through E-Sanchit, etc. However, it is worth noting that these initiatives are largely driven by the central government.
Who LEADS the rankings?
Nevertheless, given our federal structure, the role of the states is also equally important and complementary towards enhancing the efficiency of supply chains. In this context, the Ministry of Commerce and Industry instituted ranking of states on the logistics ecosystem within the framework of competitive federalism in 2018 under the name ‘Logistics Ease Across Different States’ (LEADS). The 2018 exercise was largely driven by the Logistics Performance Index (LPI) framework and assessed the EXIM logistics ecosystem of the country based on the perception of the key stakeholders in the sector. Subsequently, the 2019 version analysed the EXIM as well as the domestic ecosystem based on the same perception-based methodology. The 2021 variant of LEADS employed a more comprehensive approach with revised statistical methodology based on 21 perception and objective variables.
Gujarat topped the LEADS 2021 ranking list, possibly because of excellent infrastructure facilities and pro-active regulatory regime in the state. Haryana and Punjab are the other top-performing states, respectively. Besides, three states namely, Uttar Pradesh, Uttarakhand and Jharkhand have improved their rank significantly. A state’s LEADS score has a positive co-relation with the Gross State Domestic Product (GSDP). To put it differently, states with higher economic strength tend to perform better in LEADS. Gujarat, Punjab, and Haryana have performed way above average, given their economic prowess. It is also interesting to observe that middle-income states of Odisha, Jharkhand, Chhattisgarh and hilly states of Uttarakhand and Sikkim have been able to perform above average, given their GSDP.
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The integrated approach
The underlying expectation of the yearly exercise is that logistics capture the policy priorities in states, resulting in a synchronised and integrated approach towards improving a vast sector being regulated by different departments/agencies.
The states are expected to establish the institutional mechanism through the constitution of the State Logistics Coordination Committee (SLCC). Almost half of the states/UTs have established the SLCC and remaining may consider setting up a similar structure. The states may appoint a Nodal Officer for Logistics and establish a State Logistics Cell (SLC) to assist SLCC in the integrated development of logistics infrastructure and ease of regulatory processes. The SLC may undertake interactions with the Logistics Services Providers and industry associations to understand the related challenges. This would provide valuable inputs for drafting the logistics plan/policy with actionable solutions to address the identified challenges in a time bound manner under the aegis of the SLCC.
An institutionalised mechanism of interaction with the industry in the state is the most effective way to improve the logistics ecosystem in general and LEADS ranking in particular. Besides, this institutional set-up could be utilised to operationalise the PM Gati Shakti State Master Plan, bring synergy among state departments and plan infrastructure development in an integrated manner to bring efficiencies in the logistics sector.
An integrated approach to improve the infrastructure, regulatory regime and services is the key to transforming the logistics ecosystem in states. A robust logistics environment would add to the competitiveness of the manufacturing industry of the state, reduce wastage of the agricultural produce thereby bringing better returns to the farmers, make products more affordable to the general public and improve the prospects of the state in attracting private and foreign investments.
https://theprint.in/opinion/robust-logistics-is-launchpad-for-5-trillion-economy-states-must-strengthen-supply-chains/913642/?amp
