'Onus is on the government to restore vibrancy in logistics through budget'
Areef Patel January 20, 2017
The Indian logistics sector is at a crucial juncture. The sector has been emerging globally competitive and transforming fast into an organised framework, but there came a body blow in the form of demonetisation. The delay in GST further aggravated the situation, leaving the sector in a spot. Now the onus is on the Government to bail it out and restore vibrancy, and budget is the best opportunity for it.
Indian logistic industry, with 80 per cent of players in the unorganized sector, has come a long way, slithering through challenges and be competitive with its global peers. We witnessed an increased interest by the firms in streamlining the internal operations by horning the skill-sets, adopting new technologies and assimilating the best global practices in the recent times. The e-commerce strides further fuelled this growth and aspirations for growth. And, the expectations of an imminent one-nation one-tax regime took the sector to an inflection point.
Analysts predicted minimum 10% savings on the logistic costs post-GST that promises to ease out the bottlenecks of multiple taxes and delays at the state borders. The anticipated gains of GST still remain a pipedream. And over and above it, there is a heavy loss to the sector. The extent of quantum impact on logistics is yet to be calculated in absolute terms, given its near-term and long term effects. Perhaps, GST gains in the next couple of years would be too little compared to the loss that we faced now. This sets the pitch for a strong and positive intervention by the government in its budget.
There are many more pending demands from the industry. Further ease in regulatory mechanism, creation of industry clusters, logistic parks, and a pro-industry tax regime, are among the many in the wish-list.
Personally, I would suggest a couple of more things. I want to see the Government granting special industry status like that is accorded on the infrastructure. This infra status will pave way for more funding especially from the PEs and foreign investors, which is critical for the future of Indian logistics industry. There should be scheme to promote long-term debts for logistics players, especially in developing warehouses. This is quite possible with banks are reloaded with cash.
The present government did take some crucial steps to energise the logistics sector and improve the infrastructure in the past. But the demonetisation and uncertainty on GST have not only eroded some of the benefits but also added pains to the sector. So, it is the onus of the Government to put the logistics sector back on the right track, by paying due attention in the forthcoming budget.
(Author is Vice-Chairman of Patel integrated Logistics ltd)