By Pradeep S Mehta
We need to fix nightmarish transport logistics to be a competitive economy
In the monsoon session of Parliament, the Goods and Services Tax (GST) is likely to see the light of the day. That would be one of the most significant competition reforms India would adopt in recent times to create an internal market.
Along with fulfilling the long-pending demand of our citizens to unify India in terms of doing business, this will help reduce logistic costs of cargo movements significantly — saving about 17 per cent per trip, according to industry sources.
However, the taxes alone will not solve the problems of congestion and delays on Indian roads.
According to the All India Transporters Association, a cargo consignment faces 19 types of taxes, regulatory inspections and operational procedures. While the GST will take care of some of them, many onerous regulatory and operational barriers cause delays and increase the cost of transportation.
According to a study by IIM Calcutta and the Transport Corporation of India, the annual cost of transportation delays in India due to logistic bottlenecks is estimated to be over $21 billion, which is about one per cent of India’s GDP.
Hence, it is now time for a ‘Move India’ initiative, akin to the many other initiatives this government has taken to make India a better place to do business.
It should focus on the de-congestion of roads and faster movement of cargoes by removing regulatory and operational barriers. This will make India a highly competitive economy. While we are competitive at farm/firm gate and the functioning of our ports has considerably improved over the last few years, poor internal connectivity hinders our overall competitiveness.
In order to improve internal connectivity, the Ministry of Road Transport and Highways has done well to build a network of 12 vertical and 12 horizontal corridors.
While this is necessary to connect all major cities with each other by road, there should be concomitant efforts by State governments to develop and improve conditions of State highways and rural roads.
This is because the bulk of India’s total road network belongs to the categories of State highways and rural roads.
Other than building these transport corridors, there should be an emphasis on removing regulatory bottlenecks.
Check and borders
Among the challenges hindering seamless movement of cargoes, two are most important. First, there are numerous checks and, hence, delays at State borders. Secondly, there is lack of coordination among various agencies, which disturbs easy and speedy movement of cargoes.
As far as operational procedures are concerned, along with uneven development of road infrastructure, which is a major concern for developing effective supply chain network, there is the non-existence of a consolidated market in the logistics sector.
This coupled with unauthorised toll collection is resulting in huge transportation costs, which accounts for 35 per cent of total logistic cost in India.
To address these challenges, India should adopt ‘internal carnet’ — a tool developed by the International Road Transport Union (IRU) and has been successfully applied in many European countries. It facilitates the transportation of goods under customs supervision between two customs offices in a country. It eliminates all impediments such as inter-State cross-border checking and other administrative procedures involved in cross-border movement of cargoes. Duties and taxes are secured by a guarantee backed by national insurers. All would result in significant reduction in time and cost in the movement of internal cargoes.
Over the last few years, a number of inland container depots have been established in India and many more are in the offing. Therefore, along with GST, it will not be difficult for India to adopt ‘internal carnet’.
Other than consolidating the logistics market in India, this will enhance competition and regulatory efficiency in our internal connectivity, resulting in significant reduction in the cost of doing business.
Linking the north-east
Along with ‘internal carnet’, in order to improve our connectivity with the north-east, we should also adopt the ‘TIR Convention’, which is another instrument developed by the IRU for facilitating transit of goods at a country’s border.
It will facilitate easy and speedy movement of goods from the customs of origin to the customs of destination without inspections at the borders and deposit financial customs guarantees.
There will be a substantial reduction in transportation cost between the north-east and other parts of the country. Improved connectivity with the north-east will boost India’s larger agenda of regional connectivity with South-East Asia.
In short, apart from adopting the GST, reforms in domestic transport regulations are vital to facilitate seamless internal connectivity. It is time for both the Centre and State governments to work in tandem to make ‘Move India’ a reality.
To make it happen, there should be a special emphasis on convergence and congruence in planning for different modes of transport (inter-modality). Seamless internal connectivity will provide a boost to sub-regional connectivity, in keeping with the larger objectives of India’s Act East Policy.
The writer is secretary general of CUTS International. With inputs from Bipul Chatterjee