Multimodal Transportation and Multimodal Logistics: Status, Advantages, and Challenges

Context

This Article is based on the news “Nation’s first interstate multi-modal transport hub coming up near Delhi airport” which was published in the Indian Express. Recently the Indian Railways plans to develop multimodal transport hubs.

Indian Railways Plans to Develop Multimodal Transport Hubs

• Multi-Modal connectivity in aspirational cities: The Indian Railways will create mega railway terminals with multi-modal connectivity in aspirational cities with a population of more than 10 lakh across the country. 
• Viksit Bharat initiative: The programme is part of the infrastructure being developed for Prime Minister’s ‘Viksit Bharat’ initiative. 

What is Multimodal Transportation and Multimodal Logistics?

• Multimodal Transportation: Multimodal transportation refers to the transport of good from one point to another via more than one mode of transport. 
• Multimodal Logistics: Multimodal Logistics can be viewed as “the chain that interconnects different links or modes of transport – air, sea, and land into one complete process that ensures an efficient and cost-effective door to-door movement of goods.

Status of Logistic Sector in India

• Logistic Cost: Broadly defined, logistics covers all aspects of trade, transport, and commerce, starting from the completion of the manufacturing process all the way to delivery for consumption.
• Transportation Costs: Currently, transportation is considered to be most crucial logistics activity which almost accounts for 50- 60% of logistics cost followed.
• Size of Logistics Industry: The Size of Logistics Industry in India is $215 billion. It provides livelihood to more than 22 million people and improving the sector will facilitate decrease in indirect logistics cost.
• Port Capacity: Port capacity is expected to grow at a Compound Annual Growth Rate (CAGR) of 5%
• Status of Railways: Indian Railways aims to increase its freight traffic from 1.1 billion tons in 2017 to 3.3 billion tons in 2030.
• Freight Traffic on Airports: Freight traffic on airports in India has the potential to reach 17 million tons by FY40.

Advantages of Multimodal Logistics in India

• Hinterland Connectivity: 

  • The manufacturing hubs in India are located deep in the hinterland and faraway from the gateway ports. 
    • The major manufacturing hubs are located in Punjab, Haryana, Uttar Pradesh and National Capital Region and they contribute a major part of exports.

• Reduce Logistics Costs: 

  • It aims to reduce India’s logistics costs from the current about 14% of GDP to less than 10% of GDP, on par with international standards.
    • For instance, the Economic Survey indicates that logistics costs in India range from 14-18% of GDP, higher than the global benchmark of 8%.

• Warehousing Cost Reduction: 

  • Shifting warehouses, currently being operated inside city limits, to logistics parks will enable reduction in warehousing cost, driven by lower rentals in logistics parks situated outside the city limits.
    • According to NITI AAYOG, India’s current reported warehousing capacity is 108.75 MMT of which the private sector makes up less than 20 per cent.

• Attracting Investment: 

  • Modern logistics infrastructure development has attracted domestic and foreign investments in India’s supply chain sector. This influx of capital supports further infrastructure development and technological advancements, fostering a favorable investment climate.

• Improved Connectivity: 

  • Logistics parks that are strategically located near major highways, railways, and ports ensure efficient connectivity to domestic and international markets. This accessibility is vital for businesses seeking to expand their reach and access new customer bases.
    • For Instance, India’s first Multimodal Logistics Parks is being set up in Mappedu village in Thiruvallur district, near Chennai.

• Enhanced Visibility and Tracking: 

  • Multi modal  Logistics parks incorporate state-of-the-art tracking and monitoring systems that offer real-time insights into the movement of goods. 
    • For Example:  Maersk’s successful use of blockchain in their logistics operations.

• Minimises Time Loss at Trans-Shipment Points: 

• • Multimodal transport, which is planned and coordinated as a single operation, minimises the loss of time and the risk of loss, pilferage and damage to cargo at trans-shipment points.

• Reduces Burden of Documentation and Formalities: 

  • The burden of issuing multiple documentation and other formalities connected with each segmented of the transport chain is reduced to a minimum.

Challenges Associated with Establishing Multimodal Logistics in India

• High Logistics Cost: 

  • The Ministry of Commerce & Industry estimates that presently the country spends about 14% of its GDP on logistics which is much higher than Japan (11%) and the USA (9-10%).

• Skewed Modal Transportation Mix: 

  • In India, 60% of freight moves by road, which is significantly larger than in many developed economies. 
  • Coastal movement and inland waterways are at a nascent stage.
  • Rail transport is marginal, despite being 45% cheaper per ton–km than road, due to adverse pricing and rake booking practices and lack of intermodal facilities to enable easy transfer. 

• Procedural Complexities: 

  • Multiplicity of government agencies involved in setting up Multimodal Logistics Parks (MMLPs) which may hamper ease of business. Numerous approvals are mandatory from several Central and State ministries for the fulfilment and carrying out of these Multimodal Logistics.
    • For Example:  In India, the logistics sector involves 20 government agencies, 40 Partner Government Agencies, 37 Export promotion Councils, 500 certifications with over 10,000 commodities, reducing Ease of Doing Business.

• Disintegrated Network: 

  • India has about 200 shipping agencies, 36 logistics services, 129 inland Container Depots, 168 Container Freight Stations, 50 IT ecosystems, banks and insurance agencies largely working in silos

• Skill Gap: 

  • Despite efforts in skill development, there could be a lack of skilled workforce proficient in managing advanced logistics operations. 
    • For instance, there might be a shortage of data analysts or AI specialists required to handle data-driven logistics operations.

• Coordination among Different Modes of Transport: 

  • Ensuring seamless integration of different modes of transport could be challenging.
    • Eg: achieving efficient multimodal transportation requires well-coordinated timetables, fares, and connectivity, which is difficult to manage.

Steps taken by the Government to Improve Multimodal Logistics in India:

• Policy and Regulatory Initiatives:

  • National Logistics Policy: National Logistics policy is a comprehensive effort to address cost and inefficiency by issues lying down an overarching interdisciplinary, cross-sectoral, and multi-jurisdictional framework for the developing entire logistics ecosystem. 
    • For Example: Integration of Digital System (IDS): There will be digital integration of different systems of seven various departments (like road transport, railways, aviation, commerce ministries and foreign trade)
  • Granting of Infrastructure Status to Logistics Sector: It helps in providing credit to the exporters at competitive rates and on a long-term basis, reducing logistics costs.
  • Introduction of GST: The integration of the multilayer goods and service tax (GST) has turned the Indian tax system into a unified one and leading to greater economies of scale for transport operators.
  • E-way bill (a document generated online) under GST regime: It helps logistics firms by improving load planning, shipment tracking, operational transparency, and the overall quality of their services.

• Institutional Measures:

  • Creation of Logistics Division: The Logistics division in the Department of Commerce was created that allocated the task of “Integrated development of the Logistics sector” to the Department of Commerce.
  • Logistics division has planned to create an IT backbone and develop a National Logistics Information Portal which will be also an online Logistics marketplace that will serve to bring together the various stakeholders on a single platform.

• Infrastructure Development:

  • Integrated Approach to Logistics Infrastructure: Significant initiatives in this direction include planned development of 35 Multimodal Logistics Parks (MMLPs) under Bharatmala Pariyojana, a number of port connectivity projects under Sagarmala, renewed focus on national waterways with inland terminals, and a number of industrial and dedicated freight corridors being planned across key clusters in the country.
  • Dedicated Freight Corridor:  The government came with Dedicated freight corridors and Multimodal last mile connectivity projects to provide seamless connectivity.
  • PM Gati Shakti: It is a National Master Plan for Multi-modal Connectivity, essentially a digital platform to bring 16 Ministries including Railways and Roadways together for integrated planning and coordinated implementation of infrastructure connectivity projects.
    • PM Gati Shakti will incorporate the infrastructure schemes of various Ministries and State Governments like Bharatmala, Sagarmala, inland waterways, dry/land ports, UDAN etc.

• Performance Evaluation and Recognition: 

  • Logistics Ease Across Different States (LEADS) Index: It is an attempt to establish the base line of performance in the logistics sector based on the perception of users and stakeholders at the state level.
  • National Logistics Excellence Awards: Objective of awards is to catalyze systematic transformation of the Indian logistics sector by shining the spotlight on best practices in logistics by highlighting the initiatives and achievements of top performers.

Way Forward 

• Efficient Multimodal Integration: 

  • To facilitate efficient multimodal integration, a central coordinating agency could be set up, akin to the National Highways Authority of India (NHAI) for roadways.

• Improve Connectivity: 

  • Identify gaps in trunk and multimodal interlinkages and bridge them while developing terminals for efficient multimodal freight transfer. 
    • Increasing the share of rail transport 
    • Optimizing truck use 
    • Promoting use of fuel-efficient vehicles and alternative fuels 

• Improving Logistics Sector in India: 

  • Improving the logistics sector has huge implications on exports and it is estimated that a 10 per cent decrease in indirect logistics cost can increase 5-8 percent of exports.
    • Freight Smart Cities initiative will help in improving the efficiency of urban freight and create an opportunity for reduction in the logistics costs.

• Enhancing Hinterland Connectivity: 

  • Large scale projects such as the development of large container terminals should be integrated with hinterland connectivity projects and emphasis should be placed on last-mile connectivity networks. Privatisation of container operation by Indian Railways should be continued.

• Adopting Sustainable Technologies: 

  • Technologies that offer promise as effective means to achieve a reduced carbon footprint include alternative vehicle technologies like electric vehicles and alternative fuel technologies like LNG and bio fuels should be considered for the short- and long-term sustainability. 
    • Liquefied Natural Gas (LNG) terminals successfully developed in Kochi and Dahej can serve as examples in the port sector.

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