Challenges and Opportunities for the Logistics Sector in India

Interview with Vineet Agarwal, Managing Director at Transport Corporation of India Limited (TCIL).

With India aspiring to become a leading manufacturing and export hub globally, the logistics sector will play a paramount role. However, this sector has its fair share of challenges which in turn present ample opportunities to progress and innovate. Let’s delve deeper into this.

Current Challenges

The foremost challenge in this space is the high cost of logistics which needs to be brought down for India to become competitive at the international level. The sector is also fragmented and unorganised. Lack of adequate standardisation and digitisation is another major hurdle. For example, different variants of trucks make loading and unloading difficult and time-consuming. Manual documentation adversely impacts productivity and efficiency.

Filling the Gaps

A noteworthy shift that has happened in the logistics sector is the formalisation of the sector with GST, e-way bill and digitisation of payments.

However, there are several gaps in the scope of efficient fulfilment:

• Multi-modal transport
• Better accounting practices
• Delivering high service quality to customers
• Providing omni-channel choices to customers
• Green logistics

Opportunities

Startups working on innovative ideas for logistics will go a long way in driving productivity and efficiency in the sector. However, it is the new thought process and technology that can make a huge difference.

Of late, several startups are coming up with interesting ideas around AI optimisation tools or using APIs which the government is providing to integrate the Unified Logistics Interface Platform (ULIP) and bring ease of doing business in the sectors.

Multi-modal logistics is another opportunity area to make the Indian supply chain more efficient. Currently, road transportation contributes to 60–65% of the overall freight movement and rail is about 20–25% and postal shipping is about 6%. So, this ratio is quite skewed. The faster the shift happens to multi-modal transport, the lower the logistics cost will be and the more seamless it will be with the right documentation and right information. The government is also pushing multi-modal transport to boost the manufacturing sector through the PM Gati Shakti programme.

The multi-modal transport will drive green logistics which is another area ripe with opportunities. Decarbonisation of the logistics sector will accelerate in the next five years. It will significantly reduce carbon emissions when goods move from one transport to another.

The rise of electric vehicles as the future of last-mile delivery is worth a mention here. The next few years will witness electric vehicles and CNG-LNG vehicles on the road while hydrogen-powered vehicles are also likely to gain momentum in the long run.

Conclusion

India’s infrastructure spending is expected to reach about Rs143 trillion by 2030. However, the infrastructure spending in the last 25 years has been a catch-up game for the past and not the future. The country would need to plan for 25 years and beyond to make the logistics sector futuristic. Progress is undoubtedly happening but clearly, a lot needs to be done more.

Caret Capital (Formerly known as Supply Chain Labs) is a Venture Capital fund that backs category building startups making India’s value chain efficient. Website link — www.caretcapital.in

Caret 360 is the CXO community initiated by Caret Capital to help tech startups and industry discover each other. Collectively, the mission is to make India’s value chain efficient.