The Central Government must continue its policy of supporting the logistics sector by keeping the cost of rail transportation competitive in Budget 2022, head of one of the leading logistics players in India has recommended.
"The decision to not increase the rail freight in the previous year and various discounting schemes, such as for cement movement have really helped the industry to remain competitive vis-à-vis road transportation resulting in the modal shift from road to rail," chairman & managing director Apollo International, Raaja Kanwar told Business Today.
Integrated logistics solutions provider Apollo LogiSolutions (ALS) is a subsidiary of Apollo International.
Welcoming the proposed operationalisation of the eastern and western sections of the Dedicated Freight Corridors (DFCs) in June to coincide with the 75th anniversary of Indian Independence, Kanwar said the industry must be adequately incentivised to utilise them fully.
"International Organisation for Standardisation (ISO) tanks used to move chemicals through rail have high asset cost. DFC would bring in efficiency by improving the turnaround time for them," he observed.
The states of Gujarat and Maharashtra have a sizeable concentration of the country's chemical industry, which is the sixth largest globally.
"We further expect the government to keep the DFC freight at par the existing rail freight. To further encourage modal shift to rail, the government may also consider discounting schemes for empty tanks on the return leg," added Kanwar.
Another key challenge that ISO tank operators currently face involves the mandatory Petroleum and Explosives Safety Organisation (PESO) approval for movement of chemical and petroleum products. Restrictions on the usage of ISO tanks often hinders their multimodal movement from rail to road and vice versa.
"Considering the tanks are manufactured outside India and are certified by various global classification societies for safe transportation, the government may look into allowing the usage of ISO tanks for road transportation", suggested Kanwar.
Incentivise clean fuel usage
Encouraging the usage of clean energy sources in the industry being one of the main areas of focus for the government, logistics service providers and users are looking to shift to cleaner alternatives to diesel such as liquefied natural gas (LNG) and electric vehicles.
"The government may look to encourage this shift through favourable incentive mechanisms," argued Kanwar.
Commenting on the impressive gains made by the e-commerce industry in the recent past, Kanwar said that its growth was hampered by the lack of quality warehousing infrastructure in Tier-2-and-3 cities.
"We expect support from government for development of better-quality infrastructure in those cities through attractive financing terms such as lower interest rates and longer tenure for borrowings," he observed.
Further to providing the necessary incentives, the industry also expects a fiscal window on issues like taxation and customs activities to become more competitive globally. The Budget must, therefore, keep logistics as one of the priority areas considering its importance and associated benefits to other sectors and foreign trade, said Kanwar.
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