Building the fast lane to logistics – on Multi Modal Logistics Parks

Source– The post is based on the article “Building the fast lane to logistics” published in the mint on 1st november 2022.

Syllabus: GS3- Infrastructure

Relevance– Issues related with logistics

News- The article explains the Multi Modal Logistics Park proposed by the central government.

What are challenges related to logistics in India?

The movement of goods is expensive and inefficient. Logistics cost around 14% of GDP. It is significantly higher than other countries.

Transporting goods by rail costs 45% less compared to roads. But three-fourth transportation of goods is through roads.

What are some facts related to MMLPs?

These are large land parcels with rail and rail connectivity. It is based on the hub-and-spoke model. Goods coming here are seamlessly transferred to trains and other modes of transportation.

Freight from the production zone arrives here. It is shifted to the logistical park nearest its consumption destination.

Mechanised warehousing and cold chain facilities are also available here. Value added services like custom clearance and last stage processing facilities are also provided.

These parks were first mooted by the railway ministry in 2009. Bharatmala Pariyojana revived the idea.

What process will be followed in building these MMLPs?

35 such parks are planned to be built under PPP mode. The first park is coming up in Chennai.

National Highway logistics Management, a wholly owned special purpose vehicle of NHAI is the nodal agency for these parks.

MMLPs will be built in the DBFOT mode of PPP. Concessionaires are required to pay a percentage in gross revenue from the third year. National Highway logistical Management company will be mandated to provide infrastructure inside these parks.

Total investment in 35 MMLPs will be 52500 crore. It will be shared equally between government and private sectors. These will be built on 7000 acres of land.

These parks will handle 700 million metric tonnes of cargo at its peak capacity.

What are the benefits associated with MMLPs?

These parks will reduce the logistics cost from 14% to 10% of GDP.

It will lead to improved train services,use of modern equipment and electronic data exchange.

The movement of inland goods via containers will be facilitated.

It will reduce the freight movement on city roads leading to lower cost and lesser pollution.

It is in line with the new National Logistical Policy which aims to create the cheapest mode of transport. Warehousing charges and handling cost will be lower. Economy of scale due to shared infrastructure and competition will reduce the transportation cost.

MMLPs will be built in the DBFOT mode of PPP. Concessionaires are required to pay a percentage in gross revenue from the third year. National Highway logistical Management company will be mandated to provide infrastructure inside these parks.

What are challenges to MMLPs?        

First is the viability of private players to put their investment in logistical parks.

Another challenge is related to the multiplicity of government agencies involved in setting up MMLPs.

Soaring food and land prices are other concerns. Availability of affordable land remains a big barrier.