Perceptions of Key Logistics Players

The high logistics costs in India as compared to those in countries that have similar business environments and are going through the same stage of growth is a matter of serious concern for both the country’s manufacturing sector and its comprehensive development as a whole. Several reasons are cited for the high logistics costs in India. These include an unfavourable policy regime, lack of a multimodal transport system and the consequent heavy reliance on road transport, fragmented storage infrastructure, the presence of multiple stakeholders in the entire transport and storage value chain, poor quality of road and port infrastructure, and the absence of technology intervention in storage/transportation and distribution activities. These high logistics costs inevitably have an adverse effect on the country’s competiveness in the globalised world.

India’s Transporatation Performance Index

Globalisation has opened up economic opportunities for developing countries in the form of outflow of value-added services, low-cost raw materials , human resource skills, improved market access for their exports, efficiency gains in their economies through technology transfer and spill-over, and resource re-allocations. Consequently, various developing countries, including India, have increasingly begun to position themselves for greater participation in regional and global markets. It goes without saying that India needs to build its capacity for establishing linkages with global and regional markets for deriving the optimal benefits of engaging with the globalised world. This, in turn, depends on the creation of an efficient logistics system. For this purpose, most of the developed and emerging countries estimate logistics costs on a regular basis, and use performance indicators to measure the efficiency levels of logistics activities. In fact, it is imperative to measure these logistics costs to analyse where and how we stand vis-à-vis the competing countries in this sphere, and thereby enhance our competitiveness. Equally important is an identification of the factors that would facilitate a reduction in logistics costs.

Quantifying India’s Logistics Costs

The prevalence of high logistics costs in India as compared to other countries with a similar environment and level of development is a matter of concern as it poses challenges for the manufacturing growth and comprehensive development of the country. Several reasons are cited for the high logistics costs in India, including an unfavourable policy regime, lack of a multimodal transport system and consequently the heavy reliance on road transport, a fragmented storage infrastructure, the presence of multiple stakeholders in the entire transport and storage value chain, poor quality of road and port infrastructure, and the absence of technological intervention in storage/transportation and distribution activities. These high logistics costs inevitably have an adverse effect on the country’s global competitiveness.

Analysis of India’s Logistics Costs

Before making any policy intervention, it is important to estimate the overall logistics costs, including the various associated components/elements in order to understand and identify the problem areas and arrive at meaningful solutions. This NCAER report symbolises a major step in the direction of quantification of logistics costs. Such an exercise, in fact, needs to be conducted at regular intervals for estimating and monitoring the performance indicators and accordingly identifying the areas that need intervention. Hitherto, no serious attempt had been made to carry out research using a proper methodological framework for quantifying the logistics costs being incurred in India. Albeit, some estimates of the logistics costs incurred in the country are available in the public domain. However, these costs cannot be validated due to the non-availability of a framework for their estimation procedures. This also necessitates more comprehensive research in the area of estimation of logistics costs in India. In this context, the Logistics Division, Ministry of Commerce, commissioned NCAER to undertake interlinked studies for addressing the following issues related to the logistics ecosystem of India: *Route Study: Time and cost analysis of cargo movement along major routes in the country; *Estimation of overall logistics costs in India; and *Organisation of a Policy Roundtable among stakeholders to identify and tackle the challenges being faced by this sector.

The great water paradox

India’s relatively wet climate offers hope even in today’s dire situation. What is needed is the enforcement of programmes aimed at conserving our most precious resource

Water water everywhere/ Nor any drop to drink.” These words from an evocative poem by the famous 18th century English poet Samuel Coleridge echo the helplessness of a harried sailor his ship stranded in the middle of the sea but with no water to drink as all supplies on it have been exhausted. The sailor’s desperate cry uttered over 300 years ago seems to ring an ominous bell in India today as the country battles extreme water scarcity in several regions alongside extensive flooding in many others. This ironical situation is the result of prolonged water mismanagement leading to depleted groundwater levels coupled with a waxing and waning monsoon.

The change in monsoon patterns across the country has been causing significant rain deficit in Uttar Pradesh Chhattisgarh Rajasthan Maharashtra and Delhi over the last decade as compared to historical rainfall averages. In other States like Assam Bihar and Kerala floods caused by an aggressive monsoon are leaving behind a trail of death and destruction. The first casualty of the disruption in rainfall is agriculture as an estimated 49 per cent of India’s farms depend solely on rain for irrigation. According to the Economic Survey 2017-18 farmers without access to irrigation lose nearly 14 per cent of their income because of rainfall shocks. And among those who are able to irrigate their fields 62 per cent rely exclusively on groundwater. Since groundwater is replenished only through rain seeping into the ground the vagaries of the monsoon lead to a vicious cycle of drought-ridden fields and rapidly depleting aquifers across the country with the depth of access to groundwater plunging from 7.5 m in 1998 to 9.2 m in 2018.

A 2012 World Bank report on groundwater exploitation in India asserted that the country recorded the highest dependence on water from aquifers globally. While 90 per cent of this groundwater is used for irrigation the remainder is used to supply drinking water. Highlighting over-exploitation of 29 per cent of groundwater blocks the report predicted a 60 per cent rise in this figure in 20 years with serious implications for agricultural sustainability food security and economic growth.

However the crisis is almost upon us much before the World Bank’s deadline. In June 2018 the NITI Aayog had predicted that the demand for potable water would completely outstrip supply by 2030 in the absence of any urgent action. Even more alarmingly 21 cities including Delhi Bengaluru Chennai and Hyderabadwould run out of groundwater as early as 2020 affecting 100 million people and leading to an estimated six per cent loss in GDP by 2050.

Another complication is the impact of excessive groundwater extraction on water quality as water collected from deeper underground is more likely to be contaminated with harmful chemicals like arsenic nitrate and fluoride. An even graver food crisis looms on the horizon because when irrigation wells go dry farmers use untreated wastewater laced with industrial chemicals and human sewage for watering their food crops which eventually find their way into our kitchens. It is obvious that India is sitting on a potential “water” bomb threatening public health by unleashing a spectre of diseases among its over-populated and under-resourced habitations.

How did India venerated as a land of rivers and holy waters since primordial times achieve this disconcerting status of a nation riddled with water deficiency and toxicity? “After 1990 cities in India have grown rapidly but without considering where the resources are coming from” says Samrat Basak Director of the World Resource Institution (WRI) India’s Urban Water Programme. Reflecting on the social impact of the water crisis VK Madhavan Chief Executive of the non-profit WaterAid India contends that soon young girls especially in rural areas might start dropping out of school en masse to help their families fetch water from increasingly remote water access points. This warning is corroborated by data from the India Human Development Survey (IHDS) a nationally representative survey covering 41554 households in 1503 villages and 971 urban neighbourhoods across India jointly conducted by the National Council of Applied Economic Research (NCAER) and University of Maryland the US in 2004-05 and 2011-12. IHDS found that only 44 per cent households had access to piped water with the figure going up by merely four per cent between 2004 and 2012. The IHDS findings also show a substantial decline in the duration of water availability — from 5.3 per cent in 2003-04 to 3.8 per cent in 2011-12 — for households with piped water in metro cities. Consequently households without indoor water sources spend precious time collecting water at an average of 80 minutes per day extending to even three hours for about 10 per cent of these households. How will the economy counter this time burden and huge opportunity cost?

Compelled to take cognisance of the water crisis the Government decided to prioritise water management in the latest Union Budget to ensure provision of potable water throughout the country by 2024 under the proposed “Har Ghar Jal” scheme. Union Finance Minister Nirmala Sitharaman also announced the formation of a new Ministry the Jal Shakti Ministry by merging the Ministries of Drinking Water and Water Resources and River Development and Ganga Rejuvenation for overseeing all water-related issues. The Government has identified 1592 blocks in 256 districts facing acute water scarcity and over-exploitation of groundwater as prospective locations for rainwater harvesting and water conservation in the first phase.

Other initiatives including renovation and re-use of traditional water bodies and watershed development are slated for the next phase. The Union Budget 2019-20 also allocated Rs 9150.36 crore for the National Rural Drinking Water Programme marking a massive increase of 69 per cent over the allocation of Rs 5391.32 crore in 2018-19.

Water conservationists and experts are however not impressed dismissing the Budget provisions as a “pipe dream”. Raman VR Head of Policy at the NGO WaterAidIndia posits that in 2017 the Ministry of Drinking Water and Sanitation itself estimated the need for Rs 500000 crore for providing piped drinking water to all households. Even if States contribute half this amount the annual requirement till 2024 would be over Rs 60000 crore to cover hardware human resources infrastructural operations and maintenance costs. Where will these funds come from?

“There is no evidence to suggest that merely enhanced spending will increase both water supply and the net area under irrigation” says Dr Biksham Gujja former head of water policy at WWF-International and founder of AgSri a private organisation promoting sustainable agriculture and water resources management. He argues that the Jal Shakti Ministry should instead focus on developing tools and technology for efficient hydrological management.

On an optimistic note India’s relatively wet climate even in the most arid regions offers hope even in today’s dire situation. What is needed is efficient and wider implementation of programmes for rainwater harvesting development of water storage bodies like ponds and reservoirs promotion of water re-use and recycling and better filtration techniques for de-contaminating potable water across the country. And these solutions need to be enforced now — the time for long-term planning has run out!

Coleridge’s hapless mariner survived the challenges at sea presumably finding clean water at the end of his ordeal. But will the rising tide of India’s population be equally fortunate?

(The writer Anupma Mehta is Editor at the National Council of Applied Economic Research. Views expressed are personal)

    Get updates from NCAER