The domestic logistics sector is expected to continue at the core of the next stage of the battle against the virus in 2021 even as some easing in freight charges and container shortage, which hit the exports in the last quarter of the previous year, is also expected during the year, experts have said.
India’s $215 billion logistics sector is one of the largest globally and has been growing at a CAGR of 10.5 per cent, according to a recent report. The sector was a key player in the movement of essentials and medicines supplies during the nearly two-month long complete lockdown to curb spread of the pandemic last year.
“For the logistics sector, the year (2020) has been a busy one! More so during the lockdown, when the sector emerged as the key player in prioritising the shipments of essentials and medical goods. As the vaccines get rolled out – hopefully in the next few months, logistics will again be at the core of the next stage of the battle against the virus in 2021,” DHL Express Senior Vice President and MD R S Subramanian said.
Logistics has a critical role in enabling the Indian economy to achieve its potential in the coming months, he said, adding the sector though depends on the creation of trade infrastructure needed to enable future growth. Globally, geopolitical changes and the need for resilience, triggered by the pandemic, open a window of opportunity for both small and large businesses in India, he stressed.
Staying competitive and becoming a global sourcing base for a variety of sectors including auto, fashion, life sciences and food processing, among others, is an opportunity which needs to be harnessed, according to Subramanian.
“This will give a big boost to the Indian economy and aid it to recover fast,” said Subramanian. He said there is a need for continued reforms to simplify the regulatory framework, digitalise and drive transparency and added that many policy moves by the government are in the pipeline, which should hopefully come into the play in 2021. It may be mentioned here that in the last Union Budget, the government had announced that it will come up with a National Logistics Policy with an aim to enhance productivity and competitiveness of manufacturers by reducing cost of logistics.
The proposed policy talks about developing national and state master plans for multi-modal connectivity; formulation of an umbrella national logistics law; comprehensive standards for the sector; and developing IT applications to provide solutions that include track and trace for trucks. The logistics sector is highly fragmented and the government aims to reduce the logistics cost from the present 14 per cent of GDP (Gross Domestic Product) to less than 10 per cent by 2022.
In the latest developments, the Commerce Ministry is said to have sought views of different departments on its proposed national logistics policy. “The year 2020 has seen us in uncharted waters. The Covid-19 pandemic has resulted in a fundamental shift in the way we work, live and engage. Despite the immense challenges presented by the pandemic and lockdown, the logistics industry has been the lifeline of recovery,” said Rampraveen Swaminathan, MD and CEO, Mahindra Logistics.
For most logistics players, including Mahindra Logistics Ltd (MLL), gearing up for the COVID vaccine supply chain is a key issue, he said. “At MLL, we are in the process of partnering across the ecosystem to help develop fit for purpose solutions across the value chain,” he said. Additionally, a strong chain of right technology infrastructure to support the vaccine data is being mapped across the supply chain, Swaminathamn added.
“Going forward, we continue to see an increased level of service integration, higher growth in fulfilment logistics and increased adoption of multi-modal transportation for cost optimisation,” he said. According to him, digitisation of supply chain management with focus on newer technologies like block chain, AI, machine learning, IoT will remain a critical driver for value creation.
“In 2021, we expect some easing in freight rate, which started soaring towards the end of September, with a slight slump and blank sailing on the back of Chinese golden week, but it may not come down in a hurry, “ said Soham Chokshi, CEO, and Co-Founder at logistics platform Shipsy. The last quarter of 2020 has been unprecedented with freight rates skyrocketing and container unavailability affecting the largest of exporters across the country, he said.
“Freight rates were up 3 times to 8 times compared to the same period last year, with port congestions and delays putting further pressure on container availability,” he added. Chokshi said he also expects shipping lines to significantly increase their capacity, with many having already ordered massive vessels, which should help ease container availability and overall freight rate. “Overall, we see the year 2021 to be faring much better than the second half of 2020,” Chokshi summed up.