India needs lower logistic cost for global competitiveness

In India, logistics cost, in average, is much higher as compared to many other economies.

- Kishore Kumar Biswas

India’s flagship programme ‘Make in India’ cannot be successful if its logistics industry remains weak. Movement of goods in production involves a certain logistic cost. The more the logistic cost, higher is the price of a product.

A few months ago, Suresh Prabhu, Minister of Commerce, Government of India, reportedly said in a logistics conference that India had one of the highest logistic costs in the world. Ranked 44th in the World Bank’s Logistics Performance Index of 2018, logistics costs in India were 13-15 % of the production cost, while the global average was around 6%. In an investors’ meeting held in Kolkata a few months ago, many steel experts emphasised that for India to be globally competitive in production of goods (especially steel), its logistics sector needs to be more efficient. Some experts pointed out that the steel sector in India is not globally competitive due to its high logistical bearings. Sometimes, this cost climbs up to 45- 50% of the factory production cost.

India is dependent on imported coking coal. Import of normal coal also has been growing. These are to be transported from ports to the factories. This involves huge costs and multiple loading and unloading expenditures. Additionally, transportation of iron ore from mines to the factories is also costly. Logistics costs are also involved for many other inputs of steel production.