Budget 2023 Expectations: What logistics sector wants from FM Nirmala Sitharaman

Budget 2023 Expectations: The Indian logistics and supply chain industry has grown into a substantial economic pillar and is still a key component in advancing the country as a major economic force on the world stage. The transportation sector currently controls over 85 per cent of the value of logistics and it is anticipated that this share will remain high for the foreseeable future. The storage sector holds the remaining 26 per cent of the market. 

More than 22 million people rely on logistics in India, where it is estimated that the sector contributes 14.4 per cent of the country’s GDP.

With the recently released National Logistics Policy, which will be widely implemented in 2023, the government has made this one of its primary emphasis areas. A robust and cost-effective logistics industry has emerged as an essential element in the current global commercial and economic environment.

According to the latest report by IMARC Group, the logistics market is expected to grow at a CAGR of 9.17 per cent during 2022-2027. This is partially possible due to the strong policy support and implementation by the government, under the National Logistic Policy.

With the main aim to encourage the free flow of commodities and raise the competitiveness of the sector, the National Logistic Policy will focus primarily on a series of structured development plans, including process re-engineering, digitization, and multi-modal transportation. And while this is a welcome step that all stakeholders are eagerly awaiting, focused economic plans that can help drive innovation and growth for smaller stakeholders like the 3PL, contract logistics, and logistic start-ups.

The supply chain has drastically improved and expanded during the last few years. While the e-commerce boom a decade ago expedited the industry’s consolidation, significant advancements have been made in the last two years in the fields of tech-based innovations, storage management, and transportation. The industry has changed significantly from a decade ago thanks to the establishment of dark shops, value-added storage facilities, drone-based delivery, and the deployment of smart technology throughout supply chains.

However, the global pandemic also brought to the front several loopholes and drawbacks. From higher costs compared to international markets, a slowdown in manufacturing and other sectors during the pandemic, lack of labour, inefficiencies and hindrances due to the global socio-economic environment, the rising cost of fuel, and the huge investments in tech adoption, have all been major challenges that the sector has been facing.

Ineffective and poor transport infrastructure, lack of adequate and well-managed warehouses, lack of skilled labour and well-equipped cold storage and cold transport infrastructure have been major areas of concern in terms of food and pharma focussed cold supply chains.

These efficiencies in the cold chain especially are causing post-harvest losses estimated to be between 10 per cent and 25 per cent for perishable foods like milk, fish, and eggs and between 30 per cent and 40 per cent for fruits and vegetables. India every year produces 400 million MT of perishable food and the yearly losses from only the agricultural products amount to Rs 92,651 crores.
 
Due to certain significant changes in the nation’s buying patterns, deliveries are happening faster every day, and as a result, there are dark stores in every nook and corner of Indian cities. To address this widespread problem, the nation has created various startups that are actively focusing on automating logistics and assisting businesses with robotics.

Swarup Bose, founder of Celcius, said that tech adoption and integration have been one of the biggest areas of development and also one that is the most capital-intensive. Support in terms of access to capital through various modes, be it subsidies, FDI, Public-Private Partnerships etc., will help to drive faster tech integration and scale up smart operations across supply chain networks. 

“While there has been a strong focus by the government on logistics as a sector, a renewed and closer look at cold supply chain would benefit in cutting losses and improving the hunger index while also empowering agriculture, food & dairy and processed food sectors, along with pharma and healthcare,” he said.

Bose added that the cold supply chain sector currently is highly fragmented and marred with severe challenges that have led to the wastage of 40 per cent of the over 400 million MT of perishable food. And according to the Associated Chamber of Commerce, our post-harvest losses amount to a whopping $14billion. 

“Healthy public-private partnerships might make it easier for farmers and the government to support effective food distribution, improved product quality, better inventory management, access to newer markets, and better supply chain strategies to reduce hunger and malnutrition while enhancing income,” he added.