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Multi-Modal Logistics Park (MMLP) Governance in India
Multi-Modal Logistics Park (MMLP) Governance in India
Logistics
Park (MMLP)
governance
in India
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Table of contents
01 The idea whose time has come
01
02 Our tryst with logistics parks 05
03 The complex intermesh of stakeholders 07
04 Cutting through complexity 11
05 The proposed institutional structure for MMLPs 15
06 Conclusion 19
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01
The idea
whose time
has come
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MMLP governance in India 02
1. MoRTH
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03
LPI Score
4.50 Germany
4.00
Timeliness Customs Netherlands
3.50
3.00 Singapore
2.50
Tracking and Infrastructure U.A.E
tracing
U.S.A
India has consistently ranked low in the Logistics India LPI score evolution
Performance Index2 (LPI) published annually by the
3.80
World Bank. The LPI aims to objectively measure
3.60
the logistics sector performance of countries
3.40
across the world.
3.20
India has consistently ranked low in the Logistics 3.00
Performance Index (LPI) published annually by the 2.80
World Bank. The LPI aims to objectively measure 2.60
the logistics sector performance of countries 2.40
2007 2010 2012 2014 2016 2018
across the world. While India had improved its LPI
rank from 54 to 36 between 2014 and 2016, due LPI Score Customs
to improvements in infrastructure, programmes Infrastructure International shipments
such as Make in India and technological and digital Logistics quality and Tracking and tracing
improvements in the logistics supply chain, its rank competence
dropped to 44 in 2018. Timeliness
Source: World Bank, KPMG Analysis
2. World Bank
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MMLP governance in India 04
India’s low LPI score is primarily the result of Development of Multi Modal Logistics Parks
infrastructural inefficiencies in the logistics (MMLP) at strategic locations to enable efficient
sector. Thus, augmentation of the country’s inter-modal freight movement and formalised
logistics infrastructure, in line with production and interface between logistics service providers,
consumption bases, is the need of the hour. service users and regulators is expected to bring
about significant efficiencies in India’s logistics
A major cause for infrastructural inefficiencies
infrastructure, providing a much-needed impetus
and high logistics costs in India is the sub-optimal
towards driving logistics costs to less than 10%4 of
modal mix. The country’s current modal mix (road
the country’s GDP.
60%, railways 31% and waterways 9%) is very
different from the global norm (25% to 30% share
of road, 50% to 55% share of railways, and 20% to
25% share of waterways)3.
Process
efficiency
05 02
Providing of extra services Extra Value Provision of value
for non-stakeholders services addition added services to be
primarily from the able to cater to vast
objective of promotion range of goods
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05
Our tryst
with logistics
parks
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MMLP governance in India 06
The concept of logistics parks is not new to CONCOR exercised a monopoly over multimodal
India. The Indian Railways has played a crucial transport until the early 2000s, when private
role in promoting multimodal transportation companies were licenced to operate their own
in India since the 1960s, when the first steps freight trains. Subsequently, while various
towards standardisation of container freight and public and private sector operators such as Hind
development of Inland Container Depots (ICD) Terminals, DP World, Adani Logistics and CWC
were taken. Standardised ISO containers were have delved into the multimodal logistics arena, the
introduced in the 1970s and, in 1981, Indian sector remains unorganised5.
Railways moved the first ISO container inland to the
To enhance the efficiency of the Indian logistics
country’s first ICD at Bengaluru. In 1988, CONCOR
sector, optimise inter-modal mix, provide impetus
was established as an offshoot of Indian Railways
to organised warehousing and associated logistics
to take over the existing network of seven ICDs.
activities and remove bottlenecks in the supply
Since then, CONCOR has grown into a network
chain, the Indian government announced the
of more than 70 ICDs while a total of more than
development of MMLPunder the Bharatmala
300 ICDs form a part of the multimodal transport
Pariyojana. The proposed network of logistics parks
infrastructure in India.
is expected to reduce logistics costs by around
The Multimodal Transport Act was passed by 25%6.
the Indian Parliament in 1993 to establish a
standardised regime for Multimodal Transport
Operators (MTOs). The Director General of
Shipping was identified as the competent authority
under this law. The Act eased the process of
registration and operationalisation for MTOs
and provided a boost to the inland movement of
traffic by bringing it under the purview of a single
authority.
5. Invest India
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07
The complex
intermesh of
stakeholders
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MMLP governance in India 08
Logistics is a support activity connecting the of Road Transport and Highways and the
production and consumption centres of the Ministry of Shipping have also undertaken major
economy. Stakeholders in the primary and logistics initiatives in the recent past. These
secondary sectors of the economy need to work include enabling world-class fixed infrastructure,
closely with logistics service providers to drive introducing smart ITeS solutions like electronic
efficiency. tolling and inaugurating the Indian Customs EDI
System (ICES). The Ministry of Finance has been
The Logistics Division in the Department of
instrumental to these new developments through
Commerce, Ministry of Commerce and Industries,
facilitation of RTGS and NEFT transactions.
was created as a consequence of the amendment
to the second schedule of the Government of Whether it is the ministries charged with
India (Allocation of Business) Rules, 1961, on 7 infrastructure development (road, rail, shipping,
July 2017, which allocated the task of "integrated air) or the statutory regulators (revenue, tax, coast
development of logistics sector" to the Department guard), they do not represent the final users of
of Commerce. The amendment mandated logistics services – large industries, traders and
the creation of an action plan for integrated MSMEs.
development of the logistics sector in the country
State governments also play an important role
by way of policy changes, improvement in existing
in the development of logistics infrastructure
procedures, identification of bottlenecks and
by providing land, political support and requisite
introduction of technology.
approvals.
One of the objectives of Ministry of Road
Transport and Highways, the Ministry of Railways,
the Ministry of Shipping and the Ministry of
Civil Aviation have been to develop logistics
infrastructure such as ports, airports, road and
rail terminals and logistics parks across the
country. While the initial phase of development
was led by the Ministry of Railways, the Ministry
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09
The preferred mode of implementation for MMLPs due to the involvement of a large number of
is through the Public-Private-Partnership (PPP) stakeholders in the development and operations of
model. Complex inter-dependencies are created MMLPs in India as depicted below.
Connectivity
infrastructure
EPC
Stakes of
Regulatory
relevant
approvals
authorities
and ministries
Maintenance
Development
of connectivity
Equity and grants EPC
infrastructure
Project
Government concession Operator
of India SPV/ project SPV
authority
• MoCI
Land, R&R and
• MoRTH O&M
clearances
• MoR
Concession
• MoS
VGF &
• MoCA
• DEA Equity and
debt
• D/o food and
distribution Master plan
• Excise and Customs
etc.
• State governments
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MMLP governance in India 10
Due to absence of a nodal agency, over 50 different benefit the ultimate end user of logistics services –
approvals7 are required from various Central and large industries, traders and MSMEs. The need of
state ministries in order to develop and operate an the hour is creation of a single corporatised body
MMLP. under the Central government tasked with ensuring
smooth functioning of logistics parks in the country.
The existing model for MMLP development thus
This has been identified by the government and
is expected to create wasteful inefficiencies in
notified in the draft national logistics policy.
logistics operations, which will do nothing to
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11
Cutting
through
complexity
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MMLP governance in India 12
There are various examples within India where of India (NHAI) was created as a statutory body
governance of activities involving specialised through the NHAI Act, 1988, by an act of Parliament
operations have been assigned to an authority, as an alternative for the Centre to take over the
which brings in the knowledge base and development and maintenance of the national
coordination capabilities for the concerned highway system. The Land Ports Authority of India
activities. The governance structure for several (LPAI) was set up under the aegis of the Ministry
such authorities have evolved over time to be of Home Affairs to facilitate trade across the land
in sync with the requirements of the sector and borders of the country. The Airports Authority of
mandate. Software Technology Parks of India India (AAI) was established by an act of Parliament
(STPI), an autonomous society set up by the in 1994 for creating, upgrading, maintaining and
Ministry of Electronics and Information Technology managing civil aviation infrastructure in India. For
(MEITY), was incorporated with the objective of the sake of illustration, we will delve deeper into
encouraging, promoting and boosting software the governance structure and mandates of LPAI
exports from India. The National Highway Authority and NHAI.
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13
The Committee of Secretaries considered Agriculture and Cooperation, the Central Board
the report of the IMWG on 27 April 2005, of Excise and Customs, the Department of
approved the approach suggested by the Commerce, the Ministry of Railways, the
IMWG and proposed setting up of LPAI. The Ministry of Road Transport and Highways, chief
Cabinet Committee on Security (CCS) in turn secretaries of participating state governments,
approved the creation of LPAI in a meeting held representatives of worker associations and
on 23 November 2006. It also approved the trader groups apart from officio-members of the
establishment of ICPs at 13 locations in two authority9.
phases and set up an Empowered Steering
LPAI is mandated, inter alia, to plan, develop,
Committee (ESC) under the Department of
construct, manage and maintain ICPs, regulate
Border Management as an interim authority
functions of various agencies working at such
until the LPAI came into being8.
check posts, establish necessary service
The board of LPAI is constituted by facilities and coordinate with the concerned
representatives from the Ministry of Home ministries and departments of the Government
Affairs (nodal ministry), the Ministry of of India, along with any other agencies involved
External Affairs, the Ministry of Defence, the with regulating the entry and exit of passengers
Legislative Department, the Department of and goods.
9. Notice published by Ministry of Home Affairs, 24 February 2012 11. 19th report by Committee On Public Undertakings
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MMLP governance in India 14
4. Construct residential buildings and townships 12. Collect fees on behalf of the Central
for its employees government for services or benefits rendered
under section 7 of the National Highways Act,
5. Regulate and control the plying of vehicles on
1956, amended from time to time, and such
the highways vested in or entrusted to it for
other fees on behalf of state governments
proper management thereof
on such terms and conditions as may be
6. Develop and provide consultancy and specified by such state governments;
construction services in India and abroad and
NHAI has a three-tier structure: the
carry on research activities in relation to the
headquarters, the Regional Offices (ROs) and
development, maintenance and management
the Project Implementation Units (PIUs). The
of highways or facilities thereat
authority consists of a chairman and not more
7. Provide such facilities and amenities for the than six full-time and six part-time members. The
users of the highways vested in, or entrusted part-time directors consist of representations
to it, as are in the opinion the authority, from secretaries from MoRTH, Department
necessary for the smooth flow of traffic on of Expenditure and Department of Economic
such highways Affairs; Director General (road transport) and
Special Secretary (MoRTH). Furthermore,
8. Form one or more companies under the
two part-time (non-government) members
Companies Act, 1956, to further the efficient
are to be appointed from the professionals
discharge of the functions imposed on it by
having knowledge or experience of financial
this Act
management, transportation planning or any
9. Engage, or entrust any of its functions, to other relevant discipline.
any corporation or corporate body owned or
controlled by the government
10. Advise the Central government on matters
relating to highways
11. Assist, on such terms and conditions
as may be mutually agreed upon, any
state government in the formulation and
implementation of schemes for highway
development
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15
The
proposed
institutional
structure for
MMLPs
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MMLP governance in India 16
The success of models such as that of 2. Conduct requisite surveys and consultation
authorities like the LPAI, NHAI etc. provides activities from time to time for introducing
precedence for solving the complex issue of industry best practices and efficient planning of
ascertaining the right institutional structure for the infrastructure
the governance of MMLPs. The suggested option
3. Facilitate private sector participation to the
is constitutionalising ‘MMLP Authority of India’
extent possible
(MMLPAI), which will have the requisite expertise
for overseeing the day-to-day operations of MMLPs 4. Regulate and control the operations and
and act as a facilitator between the concerned development of MMLPs in India
stakeholders.
5. Facilitate interaction between the responsible
Under this model, MMLPAI, a corporatised body ministries and respective state governments
under the central government, would be the nodal
6. Establish BIS standards for various types of
authority responsible for all MMLPs nationally.
MMLPs
This model has several advantages when compared
7. Ensure standardisation to enhance operational
to non-corporatised government-owned models.
efficiency
Both sector and corporate governance can be
improved through the separation of regulatory 8. Encourage operational safety
functions and operational responsibility for MMLPs
9. Advise the Central government on matters
and the model enables formation of an independent
relating to MMLPs
corporate board and management structure in line
with good corporate governance principles. Clarity 10. Reduce investment costs through improved
and transparency in the Key Performance Indicators construction and efficient financing of the
(KPI) for MMLPs will enhance performance mandated infrastructure
assessments. Since the corporate entity will be
11. Promote shift to greener and cheaper modes
fully responsible for its financial performance and
long-term capital planning, there will be greater 12. Advocate the well-being of all stakeholders
management incentives for improving efficiency, including truck drivers
performance and responsiveness to consumer
13. Set up an industry- and investor-friendly MMLP
needs. This will also unlock a higher degree of
certification framework
freedom in raising capital from the market.
14. Design and implement schemes and
The suggested responsibilities of MMLPAI are:
programmes to promote logistics services and
1. Develop, own and operate MMLPs and MMLPs
associated infrastructure on behalf of the
Government of India
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17
15. Form one or more companies under the So as to ensure that the MMLP Authority is
Companies Act, 1956 to further the efficient empowered to carry out all its functions, it is
discharge of the functions imposed on it by this proposed that the body is set up under the Ministry
Act of Commerce and Industry, whereby active
facilitation between stakeholders and consultation
16. Develop and provide consultancy and
with industrial entities can be ensured. The board of
construction services in India and abroad and
MMLPAI may comprise the following:
carry on research activities in relation to the
development, operations, maintenance and
management of MMLPs or any associated
facilities.
Modes of transport/ Representatives (one each) from MoRTH, MoR, MoS, MoCA not
3
Implementing agency less than the rank of joint secretary
MMLPAI is expected to either carry out the subsuming every touch point with state and Central
development and operation works by itself or agree governments. MMLPAI is also expected to be
on a suitable entity for public-private partnership, provided with the required regulatory autonomy to
in which case the authority would become the carry out its function as an authority.
single point of contact for the private partner,
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Need for dedicated governance structure for Multi Modal Logistics Park (MMLP) infrastructure I 18
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19
Conclusion
MMLPs are expected to play a significant role in Based on our discussions with industry
catapulting the potential of the logistics sector stakeholders, and our research, we recommend
in India to more than USD215 billion by FY 2020- that the Department of Logistics, MoCI, as the
21. This can help push India towards becoming a custodian of the logistics sector, moves to establish
USD5 trillion economy by FY 2024-25. Given the an appropriately enabled statutory and regulatory
complexities involved in the efficient operation and framework to be implemented under the aegis of a
regulation of MMLPs, constituting a specialised future MMLP authority.
authority for oversight, regulation and facilitation
of such parks in India is crucial for realising the true
potential of the sector and the economy.
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