A Future of Sustainable Logistics

01 Feb 2023 Long Read

For a nation's economy to function, logistics are crucial. It has to do with how resources are generally gathered, kept, and transported to their final destination under control. A component of logistics management is evaluating the effectiveness and reachability of potential distributors and suppliers. Logistics is estimated to account for 14.4% of India's GDP. It is the primary source of income for more than 22 million people.

The logistics sector is now a frontrunner and is expected to grow at a 10-12 per cent CAGR to US $ 380 billion by 2025. But even today, logistics and supply chain costs account for 13-14 per cent of India’s GDP, which is higher than most other countries. Therefore, to accelerate the logistics industry is now in the lead. Thus, in October 2021, Prime Minister Narendra Modi introduced the Gati Shakti NMP in an effort to quicken inclusive and multimodal connectivity. It will lower logistics expenses and boost the effectiveness of the infrastructure.

With about 2.35 giga tonnes of carbon emissions in 2021, India ranks third globally in terms of GHG emissions. In order to lessen its carbon footprint and encourage the use of cleaner fuels, the logistics industry is also becoming more ecologically conscious. The government's major measures, such as the Gati Shakti National Master Plan, the GST reduction, and the Sagarmala Programme, which are timely, would pave the road for green logistics.

The development of alternative fuels presents another chance for the logistics industry. As of today, users and logistics businesses are unwilling to switch to cleaner fuels due to the subpar infrastructure of CNG and LNG pumps. Yet, because NG has lower storage costs and produces fewer pollutants, it will probably become a dependable option as a result of the government's ongoing efforts to promote it as a long-haul transportation fuel. In fact, the government intends to build 1000 LNG stations across India in the upcoming three years, with a CAGR of 17% for the growth of CNG dispensing stations.

The logistics industry has welcomed the government's proposal in the union budget 2023-24 to increase capital investment outlay by 33% to Rs 10 lakh crore, claiming that the emphasis on infrastructure will strengthen India's position in the global supply chain.

The INR 75,000 crore investment plan for 100 critical transport infrastructure projects, including a capital outlay of Rs 2.40 lakh crore for railways, will improve the multimodal logistics ecosystem and help the sector become more streamlined. The push for green growth in budget 2023, which promotes green energy, green mobility, and other sustainable initiatives, will aid in lowering the carbon intensity of the economy and creating large numbers of green-scale job opportunities. Policy interventions such as replacing old polluting vehicles will pave the way for more efficient energy use throughout the sustainable logistics ecosystem.

With this budget, this sector's competition will increase. The successful multimodal connection project will serve as a driving force behind the sector's improvement. The government's focus on the railroad infrastructure and essential transportation projects for first and last mile delivery of the designated industries establishes logistics as a vital economic pillar. In addition, the focus on upskilling workers and the deployment of the digital infrastructure will result in more young people finding employment in this industry, creating a full ecosystem. This would facilitate trade, cut the cost of logistics, and bring India into accordance with international standards.

It has the potential to significantly improve operations in terms of cost, time, tracking, reliability, transportation infrastructure, and transparency. In other words, attracting investments in logistics infrastructure can act as a force multiplier for green and resilient multimodal connectivity.

Cross-border trade will increase and supply chain growth will be accelerated with action on infrastructure improvement and MSMEs support. The proposal to build additional airports and heliports as well as to invest in tier two and three cities' urban infrastructure will improve regional connectivity, which is crucial for facilitating trade. Exports are essential for international trade and the logistics industry's ability to compete worldwide in support of India's goal of a $5 trillion economy. The government's goal of a sharp increase in exports of goods and services will be supported by a reduction in customs taxes for specific industries.

The World Economic Forum predicts that by 2030, demand for urban last-mile delivery might increase by as much as 78%, adding up to 36% more delivery vehicles in the top 100 cities in the globe.

Businesses are rapidly transitioning to EV fleets to meet changing delivery demands. EV fleets have lower operating costs and less downtime because the cost per mile for electricity is less than half that of gas or diesel, and there is no need for tune-ups or oil changes. Another advantage of EVs for businesses is their ease of integration into a larger cloud-connected supply chain network. This means that businesses can use AI-powered technologies to analyse both historical and real-time operational data, providing powerful (and actionable) insights into how to save money, reduce fuel consumption, and streamline their overall operations.

In terms of road transport, nearly 60% of freight is currently transported by road, and the Indian road logistics sector is expected to grow by 11-13% in FY23, up from its previous estimate of 7-9%. Road transport contributed more than 90% of total co2 emissions in India, despite being the third most co2 emitting sector. Currently, India transports 4.6 billion tones of freight per year, generating 2.2 trillion tone-kilometers (tone-km) of transport demand at a cost of 9.5 lakh. With urbanization, population growth, the rise of e-commerce, and rising income levels, demand for goods is increasing.

As this demand grows, the associated road freight movement is expected to reach 9.6 trillion tonne-kilometers by 2050. Road transport (i.e., trucks) transports the majority of India's goods, accounting for 70% of current domestic freight demand. The majority of that road transportation is provided by heavy- and medium-duty trucks (HDTs and MDTs, respectively). And, as road freight travel grows, the number of trucks is expected to more than quadruple, rising from 4 million in 2022 to around 17 million by 2050.

On the energy security front, India has approximately 5 trillion cubic metres (TCM) of recoverable natural gas reserves, of which less than 0.5 percent is used as a fuel in the current CNG fleet. As a result, it can meet the increased demand for Natural Gas Vehicles. This is also consistent with India's goal of increasing gas usage in the overall energy mix from 7% to 15% by 2030.

Furthermore, LNG is quieter and cleaner than diesel, with an emission factor that is 25% lower. In terms of energy density, LNG has a calorific value of 12,950 Kcal/Kg compared to diesel's 10,900 Kcal/Kg, allowing for a longer vehicle range with a similar fuel tank size.

Recognizing the economic and environmental benefits of LNG, JK Lakshmi Cement has partnered with GreenLine to introduce India's first LNG-fueled heavy trucks with a thousand-liter capacity in its logistics, allowing you to travel up to 1400 kilometers in a single trip.

With this collaboration, GreenLine will enable JK Lakshmi Cement to gradually decarbonize its road logistics operations over the next few years. Starting with a fleet of ten LNG trucks operating on the Sirohi (Rajasthan) - Surat (Gujarat) route, the companies intend to significantly expand this over the next two years. Each LNG truck saves 35 tones of CO2 per year. This switch to LNG-powered trucks will reduce toxic CO emissions by up to 70%, NOx emissions by up to 59%, Sox emissions by up to 100%, and particulate matter emissions by up to 91%. The use of LNG trucks will also help to reduce noise pollution by up to 30%.

There is growing evidence that green logistics improves supply chain performance, particularly because greenness favors an integrated view of supply chains. Green logistics has become an increasingly important part of supply chain management discourse and practices over the last few decades. It is reasonable to believe that these potential directions for a greener logistics industry will help shape the industry in the future.

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