Exporters have asked the government to expedite major infrastructure projects like Sagarmala, Bharatmala and the eastern and western dedicated rail-freight corridors to help improve India’s logistics facilities.
Citing inefficient freight movement, time taken for movement of trucks and road transportation being the preferred mode of transportation as the root causes of high logistics costs in India, they said high indirect costs of trade caused by undependable transportation and delays contribute to 38-47% of total transportation and logistics costs. India’s logistics and transportation costs are pegged at 14.4% of the GDP as against 8% of GDP in China. For exporters, unreliable lead times do not necessarily increase inventory for themselves, according to Federation of Indian Export Organisations (FIEO) and Confederation of Indian Industry (CII).
“But it does increase inventory for their customers or distributors abroad, making them less attractive as a sourcing partner and also their product less competitive,” the two industry bodies said in a study on export logistics in India. India’s cost to export stood at a $1,332 per container compared with $572 in Indonesia or $525 in Malaysia, as per the study. The commerce department had commissioned the study in April last year to study the status of logistics in India, the constraints it faces and the strategy to address these. The results of the study have come at a time when the newly-set up logistics division in the commerce department has kicked off an ambitious national logistics plan to allow seamless movement of inputs and finished goods across the country.
The study, which focuses on four sectors—auto, textiles, pharma and machinery—said complex customs regulations and non-uniformity in toll charges as regulatory bottlenecks. Due to the high importance of textiles in India’s exports and the foreign markets it services, the industry wants establishment of multi-modal infrastructure near textile manufacturing hubs. “Changing fuel price, correlated with freight charges, adds to the volatility in costs for textile industry, which is already subject to wide fluctuations in raw material and labour costs,” the study noted.