Breaking Cargo Bottlenecks in the Northeast

The central government’s push for boosting logistics infrastructure in the Northeast is driven by the strategic approach to unlock the trade and commerce potential of the region. Expansion of highways, railway tracks, air cargo infrastructure, and multimodal projects has led to improvement in overall logistics in the region. The “Assessment of Logistics Cost in India” released by the Logistics Division, Department for Promotion of Industry and Internal Trade (DPIIT) of the Ministry of Commerce & Industry has shed light on the underside of the progress in the region which needs the attention of policymakers.The report prepared by the National Council of Applied Economic Research (NCAER) highlights that cargo sent to the region shows higher costs compared to cargo sent from the region. The perpetual status quo of this ground reality is a great disadvantage for the region’s economy, as higher transportation costs add to the wholesale and retail prices of commodities procured by the region from outside. Apart from increasing costs along the supply chain, the burden of higher costs incurred in logistics is also passed on to the end consumer, which erodes their saving capacity. It also adversely affects the competitiveness of locally produced goods in the region, posing hurdles for these to compete with similar goods produced in other regions in broader markets. The report attributes the higher operational cost of Northeast-bound cargo to terrain, bad roads, higher payment to skilled drivers familiar with the terrain, and poor logistics services leading to delays and additional fuel consumption. The paucity of backhaul cargo in the Northeast is another critical factor leading to higher costs, according to the report, because when the truck bringing in goods to the region returns empty, it still incurs costs in fuel and meeting other operational expenses, which push up the overall logistics cost. Naturally, reversing this situation requires the region to boost production of goods that have high demand in markets outside at a competitive cost. When all projects aimed at improving overall logistics in the region are commissioned, it will significantly bring down the cost of northeast-bound cargo, but if the paucity of backhaul cargo continues, then it will not have a striking moderation on overall logistic cost. For goods to be competitive in broader markets, the final production cost of locally produced goods must be less than those in other regions, which is possible only when logistics within the region is strong to cut down transportation time and cost for the supply of raw materials to the factory gate. Aligning the programmes aimed at boosting agricultural and horticultural production with policies aimed at promoting the MSMEs (Micro, Small and Medium Enterprises) and industrial policies to attract investment for large industries is crucial to increase affordability of raw materials for feeding the micro, small, medium and large industrial units in the region. Mainstreaming the ‘Uttar Poorva Transformative Industrialization Scheme, 2024 (UNNATI – 2024)’ to incentivise industrial growth and lower the cost of MSME and other industrial goods is critical to boosting industrial production in the region. Incentives provided to the industrial units under the UNNATI Scheme include Capital Investment Incentive, Capital Interest Subvention and Manufacturing & Services-linked incentive. Sadly, the awareness of this industrial scheme is poor among the majority of MSME owners, due to which the region has not been able to derive optimal benefits from the scheme. The primary focus of industrial policies and schemes is on generating employment and less on boosting production. If the region is unable to increase the volume of outbound cargoes, then the overall logistics cost for goods produced in the region will continue to be on the higher side, which will also continue to keep the landing cost in the competitive markets on the higher side. Abundance of some locally grown fruits and vegetables is seen as an opportunity for boosting farmers’ income. Fruits and vegetables being perishable commodities, realisation of remunerative return on production demands preservation in cold storage or use as raw materials for food processing units to reduce post-harvest losses. Incentivising food processing under the UNNATI scheme can boost production of processed foods. For the sake of competitiveness, the food processing units getting a steady supply of raw fruits and vegetables is essential, and this can be possible only when farmers and suppliers are able to avail cold storage facilities at an affordable cost. Higher electricity costs lead to increased costs of cold storage, which disincentivises agricultural production or aggregation for industrial-scale supply. Establishment of solar-powered cold storage can be beneficial both cost-wise and for environmental protection in the region. Benefits under the Capital Investment Subsidy for Construction/Expansion/Modernisation of Cold Storages and Storage for Horticulture Products scheme can be tapped to put up solar systems in cold storages in the region. Linking expeditious completion of all logistics projects with industrial promotion is an urgent necessity to boost outbound cargo from the region.