The Aam Aadmi Party (AAP) government has been formed in Punjab with a big mandate to perform and fulfil the expectations. The priorities of the new government will be multifaceted for further betterment of the health and education infrastructure, but the big challenge is employment generation. Though it is a good indicator that in the first cabinet meeting led by chief minister Bhagwant Maan, the government has offered 25,000 jobs, further scope is limited. To unlock job opportunities in the private sector, industry and trade need a fine-tuned ‘Logistics Ease and Ecosystem’.
First, for road transportation, the new government must reconsider the previous government’s decision of reinstating truck unions in Punjab; the cartelisation will deprive the industry of a level-playing field. Suppose a laden truck came from Nagpur to Dhuri charging Rs 25,000 for freight and instead of going back unladen on the same or nearby routes, charges Rs 10,000 for return journey with freight. This could be obstructed by local truck unions, thus denying freedom of choice to the consignors and consignees to engage the services of such outside operators. Second, to overcome the locational disadvantage of Punjab being a landlocked border state far away from the seaports, state-owned freight trains will be a big boost to minimise the freight burden as the Punjab industry lacks competitiveness in comparison to southern and western coastal states.
Challenges Faced by MSMEs in Punjab
The CAGR (Compound Annual Growth Rate) in the industrial sector of Tamil Nadu is 13 per cent, the highest in the country, given its proximity to seaports. Punjab, known for the enterprising spirit of its people who made the state a hub of micro, small and medium enterprises (MSMEs), stands at 5.6 per cent. The average distance between the main hinterland in Punjab and the nearest seaport is around 1400 km. The logistics cost for export and import in Punjab is about two times more than it is in southern and western coastal states, making Punjab uncompetitive in the global markets.
The sluggish industrial growth has adversely impacted lakhs of MSMEs, making Punjab a less preferred destination for investments. Industrial clusters in the state which house 98 per cent of the MSMEs have been already struggling and reported a lack of growth. They have to cope with double freight burden, first pay to access dry ports, and then to access seaports. Not able to bear the double freight whammy — these MSMEs are sensitive to input cost as they work on wafer-thin margins — they will not be able to absorb any rise in freight costs due to cartelisation by truck unions.
For industry and trade, logistics ease matters. It is an important indicator that the investment-friendly business climate will enable faster growth of the state economy. Keeping this in mind, the Punjab government in 2017 had implemented the Punjab Goods Carriages (Regulation and Prevention of Cartelisation) Rules. Under these rules, the good carriage operators were barred from making unions in the state to end the cartelisation of the truck business by goods transporters, who were obstructing the free and fair movement of goods transport.
The Railways’ Boost for MSMEs
In our federal structure, states have an indispensable role in improving the efficiency of the overall logistics ecosystem, thereby improving trade competitiveness. Competitive and efficient logistics is the bedrock for industrial growth. The reduction in logistics costs could be a key enabler in enhancing the competitiveness of all sectors of the state economy. According to broad estimates, the cost of logistics is at a high of 12-13 per cent of the state GDP; the state can lead the way to bring down logistics cost by 5 per cent over the next 2-3 years with the help of state-owned freight wagons. The railway network is ideal for the dry port to sea port movement of bulk commodities, apart from being energy efficient and an economical mode of conveyance and transport.
The Indian Railways has emphasised public-private partnerships to implement initiatives, such as rail connectivity for ports. IRFC (Indian Railways Finance Corporation) has financed wagons at a lower rate of interest. State governments can raise funds from IRFC for wagons that could move multiple imported commodities from seaports to dry ports, and on the same routes export the goods through their freight trains to minimise the logistics cost.
The Railways is also exploring the option of opening up the Eastern and Western Dedicated Freight Corridors to private players to run a certain number of trains in a day once these get completed. These corridors will cover a total distance of 1839 km between Ludhiana and Dankuni (Kolkata). The Dedicated Freight Corridor Corporation India Ltd (DFCCIL) allows states and private operators to purchase some train paths.
The North Eastern Region (NER) states are facilitated by DPIIT or Department for Promotion of Industry and Internal Trade with transport incentive of 20 per cent on the cost of transportation but Punjab being a border state is not considered. Punjab’s new government can own 5-7 freight trains that would cost around Rs 1000 crore to facilitate the export-import (EXIM)-oriented state manufacturing sector, which will strengthen and promote the MSMEs which are instrumental in creating local entrepreneurship and employment.
The Way Ahead
There is open access to goods transportation services across southern and western region as well as other states because carriage operators are barred from making unions, ensuring free and fair movement of goods transport. As truck unions reinstated in Punjab may obstruct the free and fair flow of goods in the state, there is a need to maintain the co-status of Punjab Goods Carriages (Regulation and Prevention of Cartelisation) Rules, 2017. It will make sure that no operator or a permit holder of goods carriages shall stop any operator or a permit holder of goods carriages who wishes to pick up goods from any town or city within Punjab in the normal course of their business.
To maintain competitiveness and to bring resilience in the industrial sector, state-owned freight trains must be considered with great zeal. These steps towards logistics ease will help in transforming the industrial sector into an engine for state’s economic growth and employment generation.
The writer is Vice Chairman, Punjab Planning Board; Chairman ASSOCHAM Northern Region Development Council. The views expressed in this article are those of the author and do not represent the stand of this publication.