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Govt aims to leverage technology to reduce logistics costs

LiveMint logoLiveMint 11-06-2017 Jyotika Sood

The National Democratic Alliance (NDA) government is exploring how it can leverage technology to set up a logistics architecture on the lines of Aadhaar and link it to the goods and services tax (GST) network database.

The effort is aimed at reducing logistics costs and improving the economy’s competitive edge, as the government prepares to roll out GST from 1 July.

Radio Frequency Identification (RFID) tags on vehicles for electronic toll collection and global positioning system (GPS) devices may provide the building block for this initiative, which will help in accessing information related to the consignment, vehicle, driver and location, thereby enabling verification, according to a report prepared by consulting firm A.T. Kearney for the ministry of road transport and highways.

India has been grappling with high logistics costs of 16-18% (as a percentage of cost of the product), which make its exports uncompetitive vis-à-vis those of China, where logistics costs make up 8-10%. India’s logistics cost as a percentage of its gross domestic product was 13-14% in 2014.

The World Bank’s Logistics Performance Index (LPI) ranked India at the 54th position (2014), with the country losing $6.6 billion every year in transportation delays for freight, according to a study by the Indian Institute of Management, Calcutta.

The report, which studied such (logistics) systems across Hungary, Turkey, the US, Germany and Japan recommended that technology be used to set up modules such as Vahan Aadhaar, Logistics Park Information System (LPIS), and Road and Traffic Information System (RTIS). “A.T. Kearney India, in its report on economic corridors, has suggested to the ministry for road transport and highways to introduce a common system to link GSTN database with Vahan and Sarathi, to allow for more streamlined movement of goods in the country,” an A.T. Kearney spokesperson said in an emailed response.

The Sarathi database is envisioned as a centralized repository of driver-related information. LPIS and RTIS will provide a central interface to handle consignment traceability, reservations of resources and services; and storage and dissemination of information about road and traffic conditions, respectively. These will help in the simplification of documentation and procedures during the inter-state freight movement and also help in curbing the illegal movement of goods.

“Vahan Aadhaar seeks to achieve a paradigm shift in road transport documentation through technology and provide a common interface for all documentation needs…This concept will comprehensively capture all aspects of end-to-end movement of freight in a single system,” said the report titled Logistics Efficiency Enhancement Program, reviewed by Mint.

The government has over the last few months moved swiftly to link many government schemes with Aadhaar. It has linked Aadhaar to the Permanent Account Number (PAN) used in filing of tax returns, and even for procuring a driving licence and vehicle registration number.

“The road ministry is focusing on various facets of infrastructure development to reduce logistics costs like economic corridors, logistics parks and integration of all four modes of transportation like road, rail, air and water. So this Vahan Aadhar is one of the components of the overall plan. The consulting agency has suggested Vahan Aadhaar as a solution, but the ministry is yet to take a final call on it as different stakeholders are involved,” said a government official aware of the plan, requesting anonymity.

India plans to set up 35 multi-modal logistics parks at an investment of Rs50,000 crore and develop 50 economic corridors. It has an investment template in place which involves roping in state governments and the private sector to set up special vehicles for project implementation.

Queries emailed to the spokespersons for the road transport ministry on 26 May remained unanswered.

Analysts say GST will have a multiplier effect. “GST will be a game changer and can usher in significant efficiencies and benefits in the transportation and logistics chains,” ratings agency Crisil Ltd wrote in a 22 May report.

The present documentation is complex, primarily due to different formats used across various states and departments, separate physical checks for each authority (such as transport and commercial tax), insufficient use of technology and inadequate information technology infrastructure.

“This enables the development of a robust database of goods movement in the country, that significantly improves tracking and traceability of goods while they are moving (one of the critical parameters of the LPI index). Further, it also helps policymakers to develop a view of evolving transport needs and therefore better plan infrastructure investments,” said Anshuman Sinha, principal, A.T. Kearney India, in an emailed response.

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