Relevance: GS-3: Indian Economy, mobilization of resources, changes in industrial policy and their effects on industrial growth.

Key Phrases: global exports, high logistics costs, transport infrastructure, Logistics time, Ease of Customs, Logistics Performance Index , Customs performance, Infrastructure quality, Logistics services quality, Public and Private participation, Industrial cluster, reengineering, transparent system, decision-making.

Why in News?

• Performance index based on 11 parameters shows ports in the east and south are lagging.

Context:

• India has been making concerted efforts to expand its merchandise exports footprint. And rightly so, as exports act as an engine of growth. The objectives of production linked incentive (PLI) schemes, or of India becoming a part of the global value chain, will be realised only when these efforts lead to increased export earnings.
• Recent data suggest that exports are on the rise. However, India’s share in global exports is still hardly 2 per cent. This is a miniscule given the size of the country.
• What is the root cause of this dismal performance?
  • An oft-given reason is high logistics costs. To address this problem, policymakers are making efforts to build world class transport infrastructure. However, even as the building of hard infrastructure takes place, emphasis should be given to soft infrastructure as well. Also, upgrading of infrastructure at ports should be taken up simultaneously, as they are last point from where goods are exported.
• How do the major ports fare in terms of export related logistics?
  • While the parameters may vary from port to port, some of them are common to all ports and can be considered as yardsticks for measuring port efficiency.

Key Parameters Need Attention:

• The key parameters are:
  • Logistics time in hours
  • Demurrage cost as per cent of logistics cost
  • Ease of Customs and documentation measured on a scale of 1-10, with one being least hindrance
  • Cost of Customs clearings as share of total logistics cost
  • Speed money as per cent of logistics cost
  • Overall perception of bribes as hindrance to business, measured on a scale of 1-10, with one being least hindrance
  • Harassment by gangs, pilferage/leakage, etc., measured on a scale of 1-10, with one being least hindrance
  • Time taken from unloading of cargo to Customs check at storage yard
  • Time taken from Customs check at storage yard to when goods finally move out of port for importers
  • Time taken from the cargo transported to port to inspection by CBIC officials, and
  • Time taken from completion of CBIC officials’ inspection to cargo loaded on vessel.

Performance of Port:

• About 1,200 interviews were conducted with various stakeholders dealing with export consignments at 22 major ports of India to determine their perception of the 11 parameters. A logistics performance index of each port was determined based on the raw rate collated after normalisation. The Table lists the top 5 and bottom 5 ports computed based on the index.
• The indexation exercise indicates there are significant differences in efficiency across ports. There is ample scope for several ports to improve their efficiency in handling consignments and catch up with the ports that are performing well.
• It must be mentioned that the ports in the eastern and the southern regions of the country significantly lag in terms of efficiency compared with those in the western and the northern regions. The sooner these ports address their logistics gaps, the easier it will be for India to become more competitive in the global market.

• While exporters should see benefits in terms of logistics cost, the respective port authorities and policymakers should develop a mechanism to create a seamless system with the help of technology and digitisation, wherever required, to help the country achieve global export competitiveness.

What should Government do?

• Public and Private participation is the only solution for the financial bottleneck that Indian ports are facing to modernize their facilities and infrastructures to the world standard level. Though government encourages the private sector participation in development and operation of port infrastructure, the process and procedures are time consuming and it is not in a pace with a trade growth.
• Hence government should streamline the privatization processes and procedures and ensure the level playing field among the terminal operators. Otherwise, India maritime sector would lose its trade potential to its neighbouring ports such as Sri Lanka, China, Malaysia, etc., which already have achieved the world standard.
• Government should link all major ports and Industrial cluster places with expressway to ensure a streamline movement of goods between different entities. Port Authorities should introduce a single window clearance and a single paper clearance for pre / post shipment procedures and benefits. EDI should be implemented fully and should be integrated with other trading partners, and should ensure 24 × 7 Operations and online customs clearance.
• Government should modernize the existing CFSs / ICDs Facilities and increase its capacity to cope up with a pace of trade growth.
• Various stakeholders including Government should strive to create a congenial work environment among labour, operators, and authorities and so on and develop standard code of conduct to all ports, which would reduce the misunderstandings between terminal operators and labour.

Way Forward:

• The scope for process reengineering should be explored to remove non-value adding, yet time consuming, nodes and identify inefficient nodes by understanding the micro-processes involved in the ecosystem.
• A transparent system defining responsibility and accountability, including decision-making for each node involved, needs to be incorporated in the ecosystem by introducing standard operating procedure across all activities.

Source: The Hindu BL

Mains Question:

Q. For becoming a $5 trillion economy, India has to boost the country’s export competitiveness. In this regard discuss the challenges faced by port logistics in India and suggest measure to tackle these challenges. Critically Examine.