Improving India’s Logistics Performance Index (LPI) Ranking

Relevance: GS3 - Infrastructure: Energy, Ports, Roads, Airports, Railways etc. GS2 - Important International institutions, agencies and fora- their structure, mandate

(Source: PIB, 11/23/2023)

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Why in the news?

• Recently, a meeting of the 11 stakeholder ministries/departments was conducted to review the measures taken and the action plan to improve India’s position in the Logistics Performance Index (LPI).
• In the 2023 LPI, India was ranked 38th out of 139 countries, with its performance improving from 44th in 2018 and 54th in 2014.

How did India perform on the 2023 Logistics Performance Index?

• In the 2023 edition of the LPI, India was ranked 38th out of the 139 countries which were assessed.
• India’s performance had improved from previous editions in which it was ranked 44th in 2018 and 54th in 2014.
• According to the report,
  • Infrastructure: India’s rank rose five places from 52nd in 2018 to 47th in 2023.
  • International shipments: India’s rank improved from 44th in 2018 to 22nd in 2023.
  • Logistics competence and equality: India’s position improved by 4 places from 48th to 44th.
  • Shipping timelines: India’s ranking rose by 17 places to the 35th position.
  • Tracking and tracing: India’s rank fell from 38th rank to 41st in 2023.
  • Customs: India’s performance dropped from the 40th position in 2018 to 47th in 2023.

What are the reasons behind India’s improvements?

• According to the report, modernization and digitalization are the major reasons for developing countries like India performing better than some developed nations.
  • The government has also invested in technological reform to improve the country’s performance in terms of timelines and handling of international shipments.
• Between March and October 2022, the average dwell time for containers between India and Singapore was three days.
  • In comparison, advanced nations such as the U.S.A. and Germany took around seven and ten days respectively.
  • Emerging economies like India have used technological reform to improve tracking of consignments and dwell times.
  • For example, the introduction of cargo tracking technology at Vishakapatnam Port led to a drop in dwell times from 32.4 days (in 2015) to 5.3 days (in 2019).
• Government initiatives:
• • Since 2015 India has invested in the development and improvement of trade-related hard and soft infrastructure connecting port gateways on both coasts to economic hubs in the country’s hinterland.
  • A supply chain visibility platform has been developed through a public-private partnership in order to reduce delays.
  • For example, the NICDC Logistics Data Services applied RFID tags to containers and offered consignees end-to-end tracking of the supply chain to improve performance on the tracking and tracing parameter.
  • The PM Gati Shakti initiative was launched in October 2021 as a National Master Plan for multimodal connectivity. It has aimed at reducing the costs involved with the logistics sector and thus boosting the economy by 2024-25. Projections suggested that around ₹10 lakh crore per annum could be saved by improving logistics efficiency.
  • The National Logistics Policy was introduced in 2022 and was aimed at solving transport-related challenges, ensuring speedier last-mile delivery, efficient transport and saving time and costs of logistics borne by the manufacturing sector.

What measures have been taken to improve India’s LPI ranking?

• Dedicated cell: The LPI dedicated cell formed in the eleven Stakeholder Ministries/Departments meets on a fortnightly basis to assess measures taken and outcomes achieved across the LPI’s parameters.

• Land Port Management System: The Land Ports Authority of India (LPAI) has implemented a Land Port Management System (LPMS) to digitize operations.
  • It will also facilitate a secure electronic flow of information between all stakeholders at Integrated check posts (ICPs).
• Advantages:
  • The dwell time of cross-border movements, both trade and passenger, has reduced from 57 days to less than 24 hours.
  • Customs and border management clearance has become more efficient.
  • Shipment delivery has become timely
• Railways: Indian Railways has implemented numerous measures to improve India’s performance across the six parameters of the LPI.
  • 100% electrification of railway tracks
  • Enhancement of speed and volume of freight transport by increasing CAPEX to ₹2.6 lakh crore in FY24.
  • Implementation of Eastern and Western dedicated freight corridors
  • Transit time and inventory costs to customers have been reduced by increasing the average speed of freight trains
  • Rail containerization at ports and freight terminals is expected to lead to rail container loading increasing by three times from 80MMT in FY22-23 by FY31.
  • In order to promote multi-modal connectivity, the Ministry of Railways has attempted to examine the feasibility of railway siding at land ports.
• Airports:
  • Airport capacity building including construction of upgraded facilities such as at Kolkata.
  • An investment of ₹1200 crores is being planned for an air cargo village of 37 acres to be commissioned by Dec 2024.
• Ports: Various initiatives have been undertaken by the Department of Ports to improve India’s logistics efficiency.
  • Automation of weighbridges
  • Improved scanning facilities at ports
  • Increased DPD/ DPE share to 80% by rail
  • Creation of Standard Operating Procedures (SoPS) to simplify processes across all ports in the country.

• Scientific analysis: The CBIC has established a Custom Revenue Control Laboratory at Guwahati to assist in field formations in chemical analysis of samples of various trade commodities.

Way forward

• India’s logistics efficiency can be improved through targeted intervention alongside the above-mentioned initiatives.
• The implementation of good practices will help convey India’s commitment to objective-based assessment of LPI.
  • Therefore, all stakeholders should share initiatives, best practices, and interventions to improve their logistics efficiency.
• A timeline-based action plan must be prepared by stakeholder departments in coordination
• In order to improve the perception of the logistics sector in India, a systematic approach must be adopted to raise awareness about initiatives to improve logistics efficiency.

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FAQs

Question: What is multi-modal connectivity?

Question: What is the Directorate General of Foreign Trade?

MCQs

Question: Which of the following agencies prepares the Logistics Performance Index?

1. World Bank
2. International Monetary Fund
3. Organization for Economic Cooperation and Development
4. World Trade Organization

Answer: (a) See the Explanation

Question: Consider the following statements on the National Logistics Policy 2022:

1. It aims to reduce logistics-related costs by half by 2030.
2. It aims to place India among the top ten countries on the Logistics Performance Index by 2030.

Which of the following is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. None

Answer: (a) See the Explanation