India Has to Catch Up Fast on Trade Facilitation
India may sequence its agreeing to the WTO Trade Facilitation Agreement depending on its strategic interests, but the country must improve on its own cross-border highly under-performing trade logistics resulting in shipping cost of export from India twice over China and near about three times that from Singapore, The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has said.
Shipping a container from India costs close to USD 1200 while from China, it is in the range of USD 600 and Singapore about USD 400, the ASSOCHAM study on “Transports and Logistics in India” said, citing data from the World Bank. Likewise, the turnaround time at India’s best port, JNPT in Mumbai that handles more than 50% the country’s containers, is 1.1 days (36 hours) while it is less than 12 hours in Singapore, Dubai, Shanghai and Colombo.
A high level of logistics costs could affect India’s competitiveness, particularly for the products of value additions, the study said.
“Actually, whatever position we take in the multilateral fora, there are certain things for which we do not really need any nudge from the international obligations. If at all we want to become an exporting nation with a strong manufacturing base, the Indian logistics infrastructure be it port, airport, roads, rail network must be of international class , built seamlessly entire through the system”, ASSOCHAM President Mr. Rana Kapoor said.
According to the study, India’s port handling charges are much higher while the logistics systems are under-performing relative to China, Thailand, South Korea, Malaysia and OECD countries.
Delays in transporting goods are one of the most irritating experiences for the businesses within India and those engaging with the international trade. Presently there are 177 inter-state checkposts and 268 toll plazas across national highways, leading to costly delays. Technological solutions like smart cards for toll payments and pre-paid state taxes through online are required without delay. In fact, the success of the much awaited Goods and Services tax (GST) will also depend on having an efficient inter-state transport system.
The entire transport sector must be dealt with in a holistic manner and there is a great case for a well integrated system across different departments of the Center and the state governments. Presently transport operators are to deal with plethora of inspectors, police personnel, road transport authority officers, toll officers, and port handling staff. The policies are also fragmented.
“For instance, there are eight different departments looking after transport, shipping , road transport, highways, civil aviation, airports , airlines and those dealing with rural roads, which are also key links to the rural India,” the study noted with concern.
The road transport in particular, involving lorries, trucks, light commercial vehicles, is under-capitalized and not well integrated since it has a presence of a large number of small and medium sized enterprises. The business model of ‘single goods carrier’ is becoming difficult to operate in a viable manner whereas the big players are finding the policies too complicated to put their investment, said Mr. Kapoor.