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The Indian government is testing blockchain technology to streamline its logistics industry

An image of trucks carrying containers enter JNPT on the outskirts of Mumbai
REUTERS/Shailesh Andrade
  • Mimansa Verma
By Mimansa Verma

Reporter, Finance and Economy

Published

The Indian government has warmed up to the use of blockchain technology to streamline operations and services. Its latest experiment has been in the area of domestic trade.

On Oct. 15, the central board of indirect taxes and customs under the country’s finance ministry launched a pilot electronic cargo tracking system (ECTS) project based on blockchain technology. This aims to achieve secure documentation and GPS-based tracking of containers.

The test run is being carried out at the Inland Container Depot (ICD) of the Tughlakabad Import Commissionerate, which accounts for about 20% of the total tax revenues under Delhi Customs.

Once this test run is successful, the initiative may be launched across India after an assessment of costs, time savings, and compliances, a senior government official said.

The cargo traffic at all airports alone stood at 264,509 tonnes in August this year, according to data by the Airports Authority of India (pdf). At the country’s major ports, the figure was 57.59 million tonnes in the year-ago period, the Indian Ports Association said in a statement.

“The test run is being done within Delhi…for liquor,” the official told Quartz. “Liquor is a sensitive item, and it changes hands very frequently. It has been done in consultation with all stakeholders—the customs, the importers, the warehouse owners.”

All stakeholders have shown keen interest as the technology eases record-keeping and management, the official added.

How does blockchain technology work for trade?

Analysts believe blockchain technology will ensure secure and seamless documentation among network participants as all details are recorded digitally.

“All transactions related to consignment flow can be stored on a blockchain with a timestamp and unique cryptographic signature in a tamper-proof manner,” Sharat Chandra, a Bengaluru-based emerging tech evangelist said. “With permission access, information can be accessed at any point in time during the transit, thereby, reducing fraud and revenue leakages.”

Conventional paper-based systems, besides being risky, pile up red tape, given the number of approvals involved.

However, such new initiatives can be more secure if the blockchain nodes with each party are on a decentralised server.

A blockchain node is a digital ledger that records all cryptocurrency transactions and makes information available to everyone via a connected device. Its main purpose is to verify each batch of network transactions, called blocks.

For the initiative at ICD Tughlakabad Import Commissionerate, the finance ministry has partnered with the Asian Development Bank.

Indian banks hopping on to blockchain train

Earlier this year, 15 Indian banks came together to form an entity Indian Banks’ Blockchain Infrastructure Co to empower blockchain-enabled projects. One of them, involving the processing letters of credit, GST invoices, and e-way bills, is likely to use Infosys’s blockchain-based platform.

Globally, 54% of banks said the key focus was on exploring emerging technology, digital trade, and online trade platforms to secure near-term growth, according to the 2020 Global Trade Survey report from the International Chamber of Commerce.

“While progress is being made towards digitisation, document verification is a notable laggard when it comes to removing the use of physical paper,” the report said.

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