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Budget 2019 needs to expedite pace of reforms in logistics sector

The budget needs to play a facilitating role in expediting the current pace of reforms and creating a conducive environment to boost the competencies of the sector.

Prakash Tulsiani | January 31, 2019 | Updated 13:56 IST
Budget 2019 needs to expedite pace of reforms in logistics sector

The organised logistics industry in India is at an inflection point today and is positioned to scale a massive growth trajectory. Market-friendly regulatory interventions and the rollout of long-term policy reforms such as the Goods and Services Tax (GST) have created sustainable pathways for Indian logistics to enhance its competitiveness on a global level. The budget needs to play a facilitating role in expediting the current pace of reforms and creating a conducive environment to boost the competencies of the sector.

By obviating archaic regulatory frameworks and ushering in a one-nation one-market system, GST has played a pivotal role in bolstering the functionalities of the domestic logistics industry. The far-reaching impact of the landmark tax reform can be gauged from the fact that it has benefitted the smallest trader in the supply chain hierarchy. The simplification of the GST structure, especially over the last two months, has been a noteworthy development. It needs to be further simplified to the extent that compliance becomes an accepted norm rather than an exception. A simplified GST structure would translate into more number of businesses brought under the tax ambit and specifically for the logistics industry, it would mean a substantial increase in organised trade.  As an increasing number of players are brought under an organised trade framework, supply chain companies would be in a position to deliver better value propositions to customers and improve revenue collections for government coffers. The budget also needs to focus on paving the road for implementing a uniform GST rate throughout the country, over a course of time.

The government has keenly focused on developing infrastructure projects in the country. However, the development pace of crucial infrastructure projects continues to get delayed inordinately. For example, the commissioning of the Dedicated Freight Corridor (DFC) project. The concerned ministries and other coordinating agencies need to focus solely on delivering the product and ensuring that the project execution does not miss stipulated deadlines. The present government has shown that it has the speed and scale to execute rail, road, sea and air projects, but the time has come to accelerate the speed and raise the scale a notch higher. Sufficient budgetary provisions and fund allocations should be made for the seamless development and implementation of infrastructure projects.

The central government and several state governments have announced key logistics parks projects. However, there is no uniform policy regulating the development of these projects. The central government needs to formulate a policy specifying project parameters and guidelines for states to adhere. Healthy competition can be encouraged among states by allowing them to provide incentives to investors to attract logistics parks projects in their states. There should be clarity regarding the number of logistics parks needed or else it will lead to a situation of unnecessary overcapacity, like it happened in the case of excess power plants. Overcapacity will lead to a vicious cycle of non-performing assets, which needs to be avoided.

(The writer is executive director & CEO CFS-ICD, Allcargo Logistics)

Also read: Budget 2019: Will the exemption limit under Section 80C be increased?

Budget 2019: Why alcohol is likely to get more expensive soon

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