National Council of Applied Economic Research
The NCR-Mumbai route tops in performance. NCAER finds harassment of truck drivers a major hitch across the routes surveyed
Opinion: Dr Devendra B Gupta and Dr Sanjib Pohit
The Indian economy is going through a difficult phase due to the Covid crisis. Most of the rating agencies have downgraded the economy. And with Covid slowing down the world economy as well it implies that India has to run the extra mile to get export orders. On top of this logistics management has become a challenge with containment zones — where mobility is restricted — criss-crossing the landscape. Every rupee saved in logistics matters a lot in keeping the production cost low and thereby increasing the competitiveness of the economy.
A recent NCAER study indicates that transportation accounts for around 50 per cent of India’s logistics cost. Hence keeping a tab on the transportation cost and finding ways to reduce it is in the nation’s interest.
Of late the World Bank has developed a domestic logistics performance index (LPI) across nations including India. However these indicators provide only the status of logistics for India as a whole and not at a sub-national level. Given the regional disparity in infrastructure and development across India it is crucial to capture the regional perspective of logistics.
Moreover the survey for the World Bank Domestic LPI was undertaken only at the major growth centres and therefore does not provide an insight into the regional underpinnings.
In this context an effort has been made at NCAER to understand the logistics performance pertaining to transport activities at a sub-national level with a view to providing policy recommendations. We have identified 20 major domestic routes along which the majority of cargoes are moved across India. Understandably the routes include the Golden Quadrilateral the north-south east-west transport corridors and the upcoming dedicated freight corridors.
In general the origin and destination of each route correspond to metros or Tier-I/II cities where transport/warehouse hubs and manufacturers/producers are located. These routes ] were chosen based on interaction with stakeholders — transporters and third-party logistics (3PL) players.
The indicators
In each route the following aspects pertaining to transportation activities were tracked to judge the route’s efficiency: (1) road conditions including signage; (2) harassment by police/other agencies; (3) harassment by officials of the Regional Transport Office (RTO); (4)pilferage/leakage of consignment; (5) need to pay bribes/facilitation money; (6) unavailability of inter-modal exchange points; (7) limitations in terms of rail infrastructure; and (8) limited infrastructure in terms of parking terminals with refreshment facilities for drivers.
Since roadways have emerged as the principal mode of cargo movement our questionnaire mainly focussed on this aspect of transportation. However since policy-makers are increasingly focussing on railways and multi-modal cargo movement we also attempted to encompass this aspect in our measure by including indicators (6) to (8) listed above.
For each of these indicators the respondents were asked to rank their perceptions on a scale of 1 to 10 where 1 implies that the challenge is of low intensity while 10 refers to a high-intensity challenge or problem. The sample size of the pan-India survey is about a little over observations.
A careful assessment of the eight indicators suggests that they may be grouped under two heads: ‘soft infrastructure’ and ‘hard infrastructure’. Grouping under ‘soft infrastructure’ implies that the score on these indicators may be improved with little investments.
On the other hand improving the score for indicators falling in the category of ‘hard infrastructure’ requires significant investments in terms of finance and time. Given the financial constraints during these Covid times it is unlikely that much progress would take place on hard infrastructure. So let us focus on the parameters in respect of soft infrastructure.
The Table lists the four most efficient and least efficient routes as per the perceptions of the transporters/3PL players. As this table shows the problem of harassment faced by the truck drivers from the RTO and police officials is serious irrespective of the efficiency of the routes. In fact this point has been stressed across all the 20 routes studied by us.
The NCR-Mumbai route records the best performance comparatively and the NCR-Guwahati route the worst performance. It may be noted that the NCR-Guwahati route also faces stiff challenges in terms of leakage of consignments and the ‘need to pay bribes’ along the route. In general the Mumbai-Hyderabad Mumbai-Bengaluru and Ahmedabad-Bengaluru routes entail the minimum problems with regard to the ‘need to pay bribes’. However it should also be noted that bribes are an inherent part of the system across all the routes.
In sum we find that the routes whose nodes are located in the western/northern/southern parts of India are more efficient than the others. By and large all routes for which at least one node is located in the eastern part of India score poorly in terms of our indicators. The policy measure is clear: there is need to pay greater attention to the development of soft transport infrastructure in eastern India.
Main takeaways
The key takeaways on soft infrastructure from open-ended interactions with stakeholders are the following:
There is an urgent need to train officials at check-points. As of now these officials prefer to work in the traditional way and are reluctant to accept electronic documents.
The absence of predictability in delivery is one of the major reasons that adds heavily to the logistics costs in India. The main reason for this is the prevalence of heavy traffic congestion at various bottlenecks not only in cities but also on major highways and expressways. Daily changes in diesel prices also add to variations and unpredictability in logistics costs.
Ensuring that freight trains run on schedule and operationalising modern freight terminals are critical steps for attracting rail freight.
Clearly some of these policy prescriptions are not too hard to implement even in this pandemic time.
The writers Dr Devendra B Gupta Senior Adviser and Dr Sanjib Pohit Professor are associated with NCAER. The views are personal.