Vishleshan for Regulatory Exams, 1st October 2025: From Tracks to Trucks: India Needs Low-Cost Logistics

Staying updated on economic and regulatory issues is non-negotiable for exams like RBI, SEBI, or NABARD. Every topic matters. Every update can turn into a question. In today’s Vishleshan, we focus on ”From Tracks to Trucks: India Needs Low-Cost Logistics” This issue is timely. Its relevance is growing. And its impact is deeply linked with policy and regulation. Understanding it now will not just help in exams but also sharpen your perspective.

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From Tracks to Trucks: India Needs Low-Cost Logistics

Context: For India to lower its logistics bill, freight must seamlessly move from tracks to trucks. This requires a new ecosystem where private operators can offer reliable, end-to-end transport solutions, making rail a truly competitive option.

Link to the Article: Mint

As India faces global trade headwinds and seeks to strengthen its domestic economic drivers, logistics efficiency has emerged as a critical determinant of competitiveness. Moving goods quickly, reliably, and at low cost is central to sustaining growth. A recent government cost assessment highlighted the persistent burden of high logistics costs in India, despite ongoing reforms. The article underscores the contrast between road and rail transport, the dominance of road freight even on long-haul routes like Delhi–Mumbai (1,400 km), and the rising urgency to align India’s logistics sector with industry needs. Against this backdrop, the National Logistics Policy (NLP), which has just completed three years, becomes an anchor framework to understand the issue.

Logistics:

Logistics refers to the overall process of managing how resources are acquired, stored, and transported to their final destination. It involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. In simple terms, it’s the backbone of the supply chain, ensuring that the right product gets to the right place, at the right time, in the right condition, and at the right cost.

Why logistics matters for the economy:

An efficient logistics sector is the lifeblood of a modern economy.

• Boosts Competitiveness: Lower logistics costs make a country’s products cheaper and more competitive in both domestic and international markets.
• Drives Economic Growth: It enables seamless trade, supports the manufacturing and agricultural sectors, and is crucial for the growth of e-commerce.
• Creates Jobs: The logistics sector is a major employer, providing jobs in transportation, warehousing, and supply chain management.
• Attracts Investment: A country with a well-developed and efficient logistics infrastructure is more attractive to foreign investors looking to set up manufacturing and supply hubs.
• Helps Reduce Emissions: Logistics also has environmental implications: shifting from road to rail or waterways reduces emissions significantly.

India’s logistics costs compared globally:

Historically, India’s logistics costs have been high compared to global benchmarks, which has been a significant drag on its competitiveness.

• Past Estimates: For years, India’s logistics cost was cited to be around 13-14% of its GDP.
• Recent Assessment: A new, scientifically conducted study (published in September) by the Department for Promotion of Industry and Internal Trade (DPIIT) and NCAER has revised this figure. As of 2023-24, India’s logistics cost is estimated to be 7.97% of its GDP. This is a significant improvement and brings India much closer to global standards. (The full report can be accessed here.)
• Global Comparison:
  • Developed Economies (e.g., US, Germany): 7-8% of GDP.
  • China: 14.4% of GDP.
  • Indonesia: 24% of GDP.

This new assessment shows that India has made substantial strides in improving its logistics efficiency, making it more competitive than many other major economies.

National Logistics Policy (NLP):

The National Logistics Policy was launched on 17 September 2022 with the vision of creating an integrated, cost-effective, sustainable, and digitally enabled logistics ecosystem. It complements other initiatives such as PM Gati Shakti National Master Plan (infrastructure integration) and Bharatmala and Sagarmala (road and port development).

Key targets:

• Reduce logistics cost to 8% of GDP by 2030 (from ~13–14% currently).
• Achieve world-class ranking in the World Bank’s Logistics Performance Index (LPI). To be among the top 25 countries by 2030. (India’s rank improved to 38^th in 2023).
• Promote multi-modal transport to balance road, rail, inland waterways, and air cargo.
• Establish a Unified Logistics Interface Platform (ULIP) for digital integration across ministries, transport modes, and private players.
• Encourage green logistics by reducing emissions through electrification, LNG trucks, and increased rail share.

Progress so far:

The NLP is built on several key pillars and has already started showing a positive impact, as reflected in the revised lower logistics cost estimate. Key initiatives under or complementing the NLP include:

• PM Gati Shakti National Master Plan: A digital platform that brings 44 ministries, including Railways and Roadways, together for integrated planning and coordinated implementation of infrastructure connectivity projects.
• Unified Logistics Interface Platform (ULIP): A digital gateway that allows various government and private agencies, shippers, and service providers to exchange information on a single platform, improving real-time visibility and efficiency.
• Dedicated Freight Corridors (DFCs): Building high-speed, high-capacity railway corridors exclusively for freight transport to reduce transit times and costs.
• Bharatmala and Sagarmala Projects: Focused on building a robust network of roads, highways, ports, and coastal shipping routes.

The combination of these initiatives is helping to streamline processes, reduce bottlenecks, and create a more integrated multi-modal transport system.

Analysis of the Article in Light of Logistics Realities

Road vs Rail: The Cost Paradox

The article notes that road transport dominates freight, even on the Delhi–Mumbai (1,400 km) route, despite Indian Railways offering lower base tariffs. The paradox lies in:

• First and last mile costs: Rail needs additional transport from factory to terminal and terminal to destination.
• Handling and delays: Loading/unloading, terminal handling, and reliability issues increase effective costs.
• Premium for reliability: Businesses often pay extra for road freight to ensure timely delivery, since rail cannot always guarantee predictability.

Thus, while rail is inherently cheaper and more efficient for bulk and long-haul freight, the “ecosystem costs” double overall bills.

Cost composition of logistics in India

• Road transport: ~42% of logistics cost.
• Warehousing: ~25%.
• Material handling (in and around warehouses): ~15%.
• Rail freight: only ~7% of logistics cost, despite ~29% share in freight traffic.

This imbalance reveals how road freight dominates expenditure and why rebalancing the modal mix is crucial.

Targets under the National Rail Plan

Indian Railways aims to increase freight share from 29% now to 45% by 2030. Achieving this requires:

• End-to-end solutions (including first/last mile linkages).
• Participation of private operators to ensure predictability and accountability.
• Leveraging electrification (Indian Railways is on track for 100% electrification by 2030), reducing emissions compared to diesel trucks.

Decoding the Article: An Analysis

The Core Problem: High Transport Costs

The article zeroes in on the central challenge highlighted by the recent government cost assessment: despite overall improvements, the cost of transport remains the biggest component of India’s logistics bill.

Cost Breakdown: The article provides a crucial breakdown of India’s overall logistics cost:

• Road Transport: 42%
• Warehousing: 25%
• Moving goods around warehouses: 15%
• Indian Railways: 7%

This data is striking. It shows that road transport alone accounts for nearly half of the total logistics expenditure, while the Railways’ share of the cost is remarkably low.

The Road vs. Rail Dilemma

The article presents a classic logistics dilemma, using the Delhi-Mumbai route (1,400km) as a case study.

• Road’s Advantage: It offers door-to-door connectivity. This is its biggest strength, especially for shorter distances.
• Rail’s Advantage: For long hauls and bulk cargo (like coal, cement), it is far more cost-effective and efficient per kilometre.
• The Catch-22 for Railways: Despite having a lower charge for the main haulage (the 1,400 km journey), the first- and last-mile connectivity costs (getting goods from the factory to the rail terminal and from the destination terminal to the final market) are so high that they can double the total bill. This, combined with the perception that the Railways cannot always guarantee timely delivery, makes businesses stick to road transport even for long distances.

The Solution: An Ecosystem Approach for Railways

The article argues that the key to unlocking the potential of the railways and lowering national logistics costs is not just building more tracks, but building a supportive ecosystem.

• Increase Freight Share: The Indian Railways has a target to increase its share of freight traffic from the current 29% to 45% by 2030 under the National Rail Plan.
• Offer End-to-End Solutions: To compete with trucks, the Railways needs to move beyond just being a line-haul operator. The article suggests creating a framework that allows private operators to offer integrated, low-cost services.
• What this ecosystem would look like: A private logistics company could book space on a train for the long haul (Delhi-Mumbai) and manage the first- and last-mile trucking, loading/unloading, and warehousing, offering the client a single, predictable, and accountable service.

The Broader Benefits: Environment and Economy

The article concludes by highlighting the significant positive externalities of shifting more freight to rail:

• Reduced Carbon Emissions: With the Railways rapidly electrifying its network, shifting freight from diesel-powered trucks to electric locomotives would significantly reduce the country’s carbon footprint.
• Market Vibrancy: A more competitive cargo services market would lead to innovation, lower prices, and faster, more reliable deliveries for everyone, ultimately benefiting consumers and boosting the entire economy.

Conclusion

India’s logistics system is at a crossroads. The National Logistics Policy, now three years old, has created the framework for cost reduction, multimodal integration, and digitalisation. Yet, the article highlights the ground-level reality: road still dominates freight even when rail is cheaper, because of inefficiencies in handling and reliability gaps.

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