Northeast Connectivity Series – I
Jogighopa Multi-Modal Logistics Park
Jogighopa, a small obscure town in Bongaigaon district in west Assam beside the mighty river, rose to fame as the country’s first international Multi-Modal Logistic Park (MMLP). The hon’ble Minister for Road Transport and Highways laid the foundation stone in Jogighopa in October 2020. The MMLP would be constructed under the Bharatmala Project of the Ministry of Road, Transport and Highways (MoRTH), Government of India.
The freight movement in the country is expected to grow in line with the growth trajectory of the country in next 10 years. According to a study by MoRTH, the logistic sector is poised to expand at almost 1.2 times the rate of gross domestic product (GDP) growth of India through 2032, generating $360 billion in value added, up from $115 billion in 2017.
India has always struggled with comparatively high logistics or freight costs. The logistics costs in India were around 13% of total price of goods in 2017 compared with 8% in other major economies. The cost of exporting/ importing a container in India is, on average, 72% higher than that in China. India's road freight cost per ton-kilometer, adjusted for purchasing power parity, is ₹1.90 ($0.03), which is almost double than that of the United States, while the average speed of freight vehicles is about 50%–60% lower. The logistic cost in Northeast region of India is even higher than the average cost in India.
There are five key factors identified by the Ministry for high logistic cost:
- Unfavorable inter-modal mix: 60% of freight movement by road transport despite the lower freight cost of rail transport
- Inefficient fleet mix: higher use of smaller, inefficient trucks
- Underdeveloped material handling infrastructure: Ineffective, small, unorganised warehouses with limited mechanization
- Underdeveloped road infrastructure: Limited availability of 4 and 6 lane national highways
- Institutional and regulatory bottlenecks: Cumbersome documentation and procedures related to toll collections
Interestingly, a study by McKinsey (Mundra N., Singh A. and Uthpala R., 2018) lists out various myths about the logistic challenges in India.
Myth 1: High logistic is due to direct cost like transportation, warehousing, and value-added services. However, almost 40% of the logistic costs are due to Indirect (or “hidden") costs like inventory carrying costs, theft, damages, and losses in transit due to inefficiencies in the supply chain.
Myth 2: Use of Rail network will reduce cost as cargo movement. However, majority of cargo rail routes in India are less than 800 km long and the rule of thumb for economically feasible rail route is more than 800 km.
Myth 3: Coal and Steel are the major cargo commodities. According to McKinsey, coal and steel accounts for about 10-16% of total logistic costs while that for agriculture is about 25%. Improving efficiencies in warehousing and storage of Agri commodities will help reduce wastage and cost.
Myth 4: Major challenge in road transport is the poor quality of roads and trucks. However, studies have shown that it is scarcity of skilled drivers that pushes up the cost. According to the Ministry of road, transport and shipping, there is a shortage of around 22% in the number of commercial drivers. Add to this the low skills of the existing truck drivers causes more delays and more damages.
It is worth mentioning that India has managed to improve its ranking in the World Bank’s Logistics Performance Index (LPI) in 2018 to 44th from 54th in 2014. The ranking is based on performance on six metrics— customs, infrastructure, international shipments, logistics competence, tracking and tracing, and timeliness. However, India still lags behind many of its Asian peers like Japan (5th), Singapore (7th), Hong Kong (12th), Korea (25th), China (26th), South Africa (33rd) and Vietnam (39th).
It has been recognised by the central government that there is a need to look at the entire logistics system from beginning to end, identify the weak links and then strengthening each. The problem so far has been trying to improve each mode of transport separately with a silo-based legal and regulatory environment, disjointed IT systems, lack of skilled manpower, low predictability causing high inventory costs.
It was necessary to build a single institution to oversee, coordinate with multiple and fragmented stake holders across central and state governments and help resolve issues to bring down logistic costs.
In order to achieve that, a logistics division is established in the Ministry of Commerce and Industry to coordinate development of an integrated logistic sector via policy changes, improvement in existing procedures, identification of bottlenecks, and introduction of technology-based interventions. Logistics has been accorded “infrastructure” status in 2017, making it easier for the sector to tap long term debt from insurance and pension funds and access external commercial borrowings. An ‘integrated logistics portal’ is launched to connect buyers, logistics service providers and relevant government agencies.
The development of MMLPs, in hub-and-spoke model, at strategic locations in the country is envisaged as a key policy measure to enhance logistic efficiency, reduce logistics costs and improve competitiveness. In 2017, the Central government decided to develop 35 multi-modal logistics parks across the country under Public-Private Partnership (PPP) in Design, Build, Finance, Operate and Transfer (DBFOT) mode. Each will have a minimum area of 100 acres (40.5 hectares) with various modes of transport access, mechanized warehouses, specialized storage solutions and inter-modal transfer container terminals. These parks will also provide value-added services such as customs clearance with bonded storage yards, quarantine zones, testing facilities, and warehousing management services.
This $407 million Jogighopa MMLP project constructed in a 317-acre land along the Brahmaputra river will have air, rail, road, and waterway connectivity with a cargo capacity of 13 million metric tons (MMT) per year. Jogighopa will be connected to Guwahati with a 4-lane 154 km road; a 3-km rail line will connect Jogighopa railway station to the MMLP, a 3 km rail link will connect it to the inland water transport (IWT), and the road to newly developed Rupsi airport will be upgraded to 4-lanes. It will act as a single platform for cargo handling, warehousing, cold storage, custom clearance, truck parking, yard facility, workshops, with petrol pumps, eating joints and water treatment plant. It seeks to reduce trade cost by 10% and provide around 2 million (20 lakh) direct and indirect employment opportunities in the State. The first phase of construction is likely to be completed by 2023.
The Jogighopa MMLP project is expected to be the game changer for the entire North-east, help in the development of the states and boost trade with neighbouring countries including Nepal, Bhutan and Bangladesh, particularly trade with Bangladesh through waterways.
This article has been authored by Dr. Geetima Das Krishna.