Logistics Evolution: Charting India’s Course as a Global Transshipment Hub

In this edition of the K-Hub Series, India Business & Trade interacts with Dr Deepankar Sinha, Head – International Trade Operations & Logistics Division, Head-Research at Indian Institute of Foreign Trade (IIFT, Kolkata) and Program Director of Centre for Trade facilitation & Logistics (CTFL), IIFT set up by Logistics Division, Ministry of Commerce & Industry, Government of India.

Dr Sinha discusses the criticality of logistics management to smooth functioning of trade, current state of the logistics industry in India, growing role of technology, the growing emphasis on sustainability and what the future holds. He also shares his views on a key question – can India indeed aspire to become a global transhipment hub, given its strategic location at the centre of the trans- Indian Ocean routes which connect the Europe and East Asia?

India Business & Trade: So to start with, I think it would be great if you could share, you know, give a brief overview of experience in the shipping and logistics industry, how you have seen the role of logistics management evolve over the years in facilitating international trade as per your experience.

Dr Deepankar Sinha: As regards the logistics sector, I have experience of more than 20 years in the port industry. And thereafter, I have almost completed 17 years of teaching training and consulting in this arena. And since the time when I joined the port in 1987 till now, I have witnessed the complete switchover from a manual-based system to a fully automated in the most developed countries.

In India, we have seen good hybrid systems with man-machine interactions – from head loads being carried and dumped onto ships or trucks to various kinds of the cranes and equipment to load, unload for material handling. Now we are seeing automated guided vehicles that move in the ports with no man to be seen nearby.

During this period, we have seen new equipment getting introduced and also being phased out, given the speed of innovation and disruption. For instance, in the field of container handling, straddle carriers were introduced in many ports in the developed world. But then they were quickly replaced by yard gantry cranes, like rubber-tired or rail-mounted ones.

India Business & Trade: How integral is logistics management to the smooth functioning of international trade? And what key elements can contribute to effective logistics in exports? Could you please, lay them out for us?

Dr Deepankar Sinha: In international business, people mostly concentrate on the overseas component, which accounts for the major freight cost and time. From port to port by ship or from airport to airport by air, this becomes the major component of the international system.

But we forget that the entire end-to-end solution is an important element to be considered, taking into account the first mile and the last mile delivery requirements. So when we plan our logistics system, we should keep in mind that there is a complete compatibility between the first mile and the last mile delivery with an in-between component of port to port. Now, in many cases, it varies with the responsibility and the risk taken up by the seller and the buyer.

In many cases, the seller has the risk of transporting the goods, but not in all cases. For example, if a buyer buys a material on ex work basis, that means coming to my factory or my warehouse and taking the goods under their control, then the seller does not have much to do. And they may pack the materials in a manner, which may face issues at the last mile.

In many countries there may not be railways at the other end. There may not be equipment to handle the weight and the volume that can be handled in the first mile part. So these compatibility issues have to be taken into account. And the end-to-end solution has to be designed, whether it is the responsibility of the seller under the INCO term called direct delivery duty paid. We call it DDP. Or it is completely buyer’s responsibility under ex-work. So there has to be a complete synchronization of the logistic system.

The major characteristic is that the first mile and the last mile are fragmented. There are a large number of transporters, agents, intermediary players to be contacted. And a very close coordination is required among them with intensive network control. It is not just about tracking and tracing while the goods move by air or by sea. That’s actually very easy because we know with the live trackers now available.

It is all about the delivery. Unless the seller can deliver the goods, the conditions are not met of its sales agreement. So that is a very important thing that has to be borne in mind, the end-to-end solution.

India Business & Trade: Considering that you are the program director for Center for Trade Facilitation and Logistics and have been working with the government of India in this area so extensively. How do you feel is the current state of logistics in India and what are the key strengths and challenges? Also, how has it evolved to meet the demands of a growing economy, particularly when we are looking at achieving the $1 trillion export target?

Dr Deepankar Sinha: To answer to this question, it cannot be straight away said yes or no improvement. What I would like to mention is that there have been a lot of improvements, but they are discrete in nature. It means that there is no uniformity in the improvements across the entire logistics chain. For example, most of the goods move by multimodal system. That means they change from one mode of transport to another – from road to rail, rail to ship and from ship to again by road or by rail to the ultimate destination.

Now, in this multimodal movement, there are 13-14 important dimensions to be considered. It is not about choosing the lowest cost or fastest mode of transport. It is about looking into the specific 14 dimensions that I have been able to call out over my 37 years involvement in this industry.

One of these dimensions is cargo mix. What is my cargo mix in the logistics chain? When I say cargo mix, I mean that if my client requires a bag of rice to be delivered to their warehouse, say a 25 kilo or 50 kilo bag, it will not mean that the 25 or the 50 kilo bag will be made ready at the source.

The entire cargo can go in industrial bags of 100 kg or a full ship load and truck load of paddy grains. Then it can be mailed in the intermediary place where it can be put in bags. Bags can be put in containers. And finally, again, containers will be dispatched and then the bags would be unloaded. So there are a lot of changes in the cargo form. From the bulk to dry bulk to bags in a break bulk; from break bulk to container; from container to break bulk and then the last mile delivery.

So in this multimodal system, discrete improvements will not bring the right results. When we want to improve the port, we may have spent a lot of money. But that becomes unutilized or infructuous when the road system is not equipped to meet the flow of goods inside the port.

Maybe the port is ready to handle, say, for example 20,000 to 40,000 tons a day. But my road capacity is only limited to, say, 5,000 to 10,000 a day. So my cargo will only arrive at a rate of 10,000 tons a day. And my port is ready for 20,000 to 30,000. That means almost an underutilized capacity of 20,000 tons a day.

So if improvements really have to be seen, felt, and benefits provided to the end customer, or the buyer and the seller, complete seamless planning of the logistics system from first mile to last mile is needed. And especially, I’m not talking of the last mile because if it is within the country, at least from the first mile to the point where it will cross the border, whether it is a seaport or a airport or a land port. So that is a very important aspect that is required to really realize the benefits of all the improvement projects that have been taken up in the country, whether it is road network by NHAI, whether it is ports under Sagar Mala, whether it is air system under the air cargo improvement system.

We need a single planning body to look into all the projects and see how they impact. It cannot work in silos. Ministry of Shipping, Ministry of Road, Ministry of rail, and Ministry of Civil Aviation, along with the regulatory bodies like customs, excise, GST, have to all work together for a really logistics system to be effective.

India Business & Trade: So in this case, how do you feel the prospects of the national logistics policy which was launched? Is it able to cover those bases effectively? And any suggestions you have?

Dr Deepankar Sinha: During the preparation of National Logistics Policy, I was also involved in many of the interactions. I feel the policy has taken into account the major dimensions of the logistics but knitting together all the dimensions. Who is going to do that? That is an issue. Policy is all about the intentions, covering all the dimensions of a particular subject matter. That has been well-let down. It includes all kinds of elements, whether it is warehousing, different modes of transport (rail, road, water, air, pipelines), packaging and metal handling and regulatory bodies; but knitting them together is important.

For example, for agri products like apples and nuts grown in a cold place like Simla or say Kashmir, I may not need any temperature controlled truck or a carrier because the temperature there is good. That is why that particular fruit or vegetable has been grown there.

But when the truck comes to Delhi, the temperature would increase by 20-25 degrees centigrade and in the process, perishable goods like apples and plums may get spoiled and the market shelf life may decrease. So the cold chain has to be in place.

Cold chain does not mean that I have to keep everything cold in Kashmir because it’s already cold there. It means that from the first to the last mile delivery, my temperature, humidity, pressure, air circulation and all other risk factors are taken care of. So that is where it is important that the national logistics is you know, embedded into the planning process. And again, I would stress that there needs to be a single planning body, which may be compartmentalized according to some specialist areas or experts may be drawn.

India Business & Trade: With the advent of new technologies, digitization, IoT, AI, blockchain, how do you view the impact on efficiency and transparency of logistics in India and trade growth? And what can we expect in the coming years with regard to the role of these technologies?

Dr Deepankar Sinha: It has been well proven through different studies and experiments that these technologies are going to really help us in enhancing the transparency of the supply chain and having a better control. There are new concepts like digital twin, wherein you get on real time information and use them to simulate what is likely to happen in the future.

So all these things have been demonstrated, prototypes have been developed, but implementation is not happening in the way we think because it requires a community of all the players involved – seller, transport operators, warehousing agencies, packaging agencies, regulatory bodies, agencies involved in taking regulatory clearances, inland container depots  and air freight stations.

So there has to be a complete agreement between stakeholders that they would go by the protocol laid down in the blockchain or similar technology. Now some may agree to come into the fold, some may not agree. If one player does not agree, then the entire chain is broken.

Whatever information is shared by a blockchain technology, it has the capacity to be more resilient, to the effect that you cannot change the information easily. The whole thing gets disrupted the moment a particular entity or node does not like to join the consortium or the node which forms the chain.

Within India, we have port community system and ICEGATE. Though they are to very great extent silos, still it has been proven in previous attempts that people can be brought together. But international trade is cross border. It would require that you have a complete agreement with the government and the private players to talk to each other.

That means government and private players of country A and country are all in sync with the protocol and the regulations laid down to follow that the information and the documents will be transferred electronically. There has been so many attempts to make bill of lading electronic.

But only to the extent of 1% out of 1 million or so bills of lading being issued every year is electronic. Why so? If people in India are now coming forward, why not in the other parts of the world? In  a recent study that we made while professing the idea of logistics for trade under the G20, we saw that overall, cross-border movement of information is very poor, very less. And it is to the extent of 30-40% in developed countries. And that too on a few documents like country of origin certificate and the inspection certificate, where the governments have agreed to exchange the documents.

But there are hardly government and non-government players, private players, coming together to agree upon exchange of these document. That is why the government of India under the 2023 G20 presidency laid down the high level principles. These 10 high level principles were laid down and were first to be adopted in the Jaipur call of for action. I was the part of it as a knowledge partner and I felt happy that we could make such progress. Now this has to be substantiated. Beyond the high level principles to see what technology, what protocol and what methods should be adopted so that the principles can be implemented.

And because one of the principles says that the system should be interoperable and neutral, it should not create a digital divide between a rich and the poor country. And in order to do that, we have to identify the technology, the protocols, and the method, which will satisfy all the 10 principles, which includes interoperability, neutrality, trust, privacy, security, and so on.

India Business & Trade: Regarding the concept of sustainability, which is a buzzword being heard across business and trade, how is the logistics sector planning to address its environmental concerns? And what role do sustainability practices play in shaping the future of this industry?

Dr Deepankar Sinha: Well, sustainability is the buzzword now. And all developed countries have very interestingly introduced something called the carbon tax or so. So sometimes I wonder whether it is a way to make revenue or whether it is really the way to cut the carbon emission, carbon footprint, energy consumption and reduction of the waste. Because if there is a tax and no one has done anything to be sustainable, everyone pays the tax, then it gets nullified so far as competitiveness is concerned. So if I know that carbon tax is 10% of my consignment value and all suppliers are not meeting the requirements, all of them pay 10%. I’m not worried because I will build in that tax component into my pricing. So that is one part of the story.

But the real part of the story is climate change, for which we we see a continuous assault by cyclones, earthquakes and pandemics, which are arising out of this climate change. In this context, I agree that we need to have some penalty measures, but penalization is not the way to ensure implementation.

The way is to ensure that benefits are provided, wherein if my goods cross a port or a route or a transport carrier where my total carbon, water, energy and waste footprints are less, then I am awarded for it. Then people will always look for the places from where they can benefit. The logistics decision will change from low cost, low time routes to sustainable routes, because there is something to gain out of it.

And in the process, there would be a very serious implication. Some ports will be marked red because they’re highly polluting and the carbon-emitting ports. Some will be marked orange, some would be marked yellow, some would be marked blue, some would be green. So red ports are going to die out if these policies come up. So there has to be a comprehensive upliftment of all the infrastructure together up to a certain level. That means everyone should come beyond red, at least orange or yellow, and then start competing with each other. Now you can do whatever you want.

But beyond this, you are not going to get this benefit. And that should not be taken as a subsidy. I do not know whether WTO and similar bodies will consider such benefits to be given through a sustainable route as a subsidy or not. Else it will again have a boomerang effect. People will not go by that. And countries will be hesitant to put forward such policies.

So maybe that can be one way to ensure that really sustainability happens. There are many technologies that has been innovated and invented, like hydrogen fuel. The use of solar has been there quite for some time and electric vehicles are also in place. So there has to be optimization, because no particular renewable source of energy can meet all the requirements. So the idea is to reduce the non-renewable sources of energy and non-degradable inputs. But it cannot be zero. At least, I don’t see net zero can happen. But it cannot be zero use. So that planning has to be done.

India Business & Trade: Singapore is considered the busiest transshipment hub, and India obviously is currently in the process of major upgradation, but is that something India can aspire to, to become a transshipment hub in its own right in the coming years?

Dr Deepankar Sinha: Why not? It is all about the price and the cost competitiveness. If India can offer a productivity level wherein the stay time of the ship reduces and provides infrastructure wherein the ships of the right size can get accommodated, it is definitely feasible.

If the shipping lines feel attracted, it is for three reasons. First of all, they are willing to come to the port because it is offering them a very high level infrastructure, wherein the stay time is less and the regulatory processes are minimal.

The second is their capacity to pay the port charges or the freight charges. If the importer and exporter finds it costlier, they may not bring the cargo here even if the ship charges are less at the port. If they don’t bring the cargo here, ships won’t be ready to come here. So there has to be demand for the cargo.

And larger the ship you are trying to call, we have to understand that we need full ship load cargo demand. Else shipping lines will not find it lucrative to profitable to come to that particular port. There has to be high demand for the cargo. And there has to be the willingness for the ships to come in terms because they have been offered a better infrastructure facility. And then everyone should have the capacity.

It is said, better the level of services that you provide, value addition, you are likely to charge more. Many a times, if your cargo is not high-valued cargo, then people are not ready to pay for that. They will say, okay, let it go by export, wait there for two days. I don’t mind because these two days will increase my cost by $50. But instead, if I want to reduce my two days, my cost is $100 because I have to pay an additional express charges or high value added charges and my commodity is a low cost commodity. So that is the consideration. With these considerations, yes, Indian ports can always address this challenge by providing the right services to all the stakeholders.

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Prof. Deepankar Sinha has a PhD [Industrial & System Engineering] from Indian Institute of Technology (IIT), Kharagpur. 20+ years’ experience in port and shipping industry, and 15+ years of experience in teaching, training and consultancy in the field of Trade Facilitation, Digitalisation, Global Logistics, International Trade Operation and System Engineering.

He is serving as Head – International Trade Operations & Logistics Division, Head-Research at Indian Institute of Foreign Trade (IIFT, Kolkata) and Program Director of Centre for Trade facilitation & Logistics (CTFL), IIFT set up by Logistics Division, Ministry of Commerce & Industry, Government of India. Dr Sinha was also assigned the role of Knowledge Partner for the theme – “Logistics for trade” under India’s G20 Presidency.

Major Projects and Studies include: Transportation projects: Roads (Asian Development Bank- ADB), Blue Economy (RIS),  Inland Waterway Connectivity for BBIN countries (CUTS International); Process Development Projects: Seaport Business Process Reengineering (BPR),  Trade Facilitation Agreement (Logistics Division (LD), Ministry of Commerce & Industry – MoCI), and Ease Of Doing Business Index (LD, MoCI),  Standardization of hazardous cargo and onion supply chain (Bureau of Indian standards – BIS);

Digitalisation projects: Digitalisation of Trade Documents (G20); Port Community System (Indian Ports Association-IPA); Policy Projects: National Logistics Policy, draft logistics policy for state of Nagaland; Infrastructure projects: Mechanization of container handling at Netaji Subhash Dock (NSD) Kolkata port, feasibility of setting up of a container terminal, and similar.

Capacity building assignments include: Trainings on international trade operations & logistics conducted for companies in India and abroad (OLAM International and similar).

Innovations & Publications: He has one patent (AI based response to customers’ queries) and filed second one (Electronic Payment System); 5 scholars awarded PhD Degree; 3 Research Scholars pursuing PhD. 1 book on Global Supply Chains and Multimodal Logistics, IGI Global, USA. Authored 3 other books. Published papers in national and international journals listed in ABDC, ABS, Web Of Sciences and Scopus.