The central government is working on a framework to assess the logistics cost of the country, and is expected to come out with a baseline estimate by the end of the year, Special Secretary Sumita Dawra in the Department for Promotion of Industry and Internal Trade (DPIIT) said.
“A large section of India’s logistics sector is unorganised, and it’s very difficult to come up with accurate projections and estimates for this. Which is why the government is refining its estimate and not rushing to announce a number,” Dawra said. A baseline estimate of logistics costs will help DPIIT show a clear year-on-year comparison of how the National Logistics Policy (NLP) is helping reduce such costs.
The government was earlier expected to announce the baseline estimate by October, but the process has been delayed due to the complexity involved in accurately coming out with an estimate.
“No other country in the world has come up with an accurate baseline estimate for its logistics costs. There is no methodology we can follow,” Dawra explained, adding that the DPIIT has shared its methodology with the World Bank, which has accepted it. She added that while the government has not done any surveys to arrive at an estimate, going forward, the DPIIT is looking to carry out surveys to come up with a more accurate figure.
“It is very difficult to accurately come out with an estimate for logistics costs. You have to start with a baseline and improve its accuracy every year,” Dawra added. Government officials indicated that per their findings under the new framework being developed by the DPIIT, the baseline estimate for logistics costs is likely below 11 percent of the gross domestic product GDP.
Currently, the industry works with estimates ranging between 8-14 percent of the GDP.
The government has arrived at its estimate by looking at the Ministry of Statistics and Policy Implementation (MoSPI) data sets and supply & use tables, among others. These tables show the structure of the costs of production and the flow of goods and services.
The DPIIT has used MoSPI data for transportation costs, warehousing costs, supportive and auxiliary transport activities, etc.
Transportation remains the biggest component in India’s baseline estimate for logistics costs due to gaps in the country’s logistics infrastructure.
