Union Budget 2021: Highlights and industry reactions

Budget 2021

“Bringing down logistics cost for the industry is at the core of our strategy to enable Make in India”

~ Union Finance Minister Nirmala Sitharaman

The Finance Minister presented the “paperless” Union Budget 2021-22 in Lok Sabha today. This is the third budget introduced by Ms Sitharaman.

The Budget speech focussed on the Centre’s Atmanirbhar Bharat vision, apart from key allotments to different sectors.We look at the key takeaways for the Logistics Sector:

Railway Infrastructure: National Rail Plan

Under the National Rail Plan for India, 2030, Ms Sitharaman announced the plan to “create a future-ready Railway system by 2030”.

“Bringing down the logistics cost for the Industry is at the core of our strategy to enable Make in India”, she shared.

“It is expected that the Western Dedicated Freight Corridor and Eastern Dedicated Freight Corridor will be commissioned by June 2022,” Sitharaman added.

The following additional initiatives are also proposed:

The Sonnagar Gomoh sections : 263 kms of EDFC will be taken up in PPP(Public-private Partnership) mode this year itself.

Gomoh- Dankuni section: 274.3 kms will be also taken up shortly in short succession.

She also announced plans to undertake future Dedicated Freight Corridor project viz. East Coast DFC (Kharagpur to Vijaywada) East West DFC(Bhuswal-Kharagpur-Dankuni), North- South DFC(Itarsi to Vijaywada).

“Detailed project reports to be undertaken in the first phase”, she said.

Broad Gauge Route-Kms (electrified) is expected to reach 46000 RKMs i.e 72% by end of 20-21 from 41,548 RKMs on 1st Oct 2020. 100% electrification of Broad Gauge Routes to be completed by December 2023, says the FM.

Shipping and Ports

Major ports will be moving from providing operational services on their own, to a system where the private players will manage it for them, says the Finance Minister

“Around 90 ship recycling yards at Alang in Gujarat are compliant with latest international norms. Recycling capacity will be doubled by 2024, this will generate an additional 1.5 lakh jobs for our youth”, she shared.

Road Infrastructure and Highways:

To further augment road infrastructure, more economic corridors are being planned, shared the FM. Some of them are:

  • 3500km of National Highway Works in the state of Tamil Nadu at an investment of INR 1.03 lakh crores, the construction will start from next year.
  • 1100 km of NH works in Kerala at an investment of INR 65,000 crores including 600 km section of Mumbai-Kanyakumari Corridor in Kerala.
  • 675 km of Highway Works in West Bengal at a cost of INR 25,000 crores including upgradation of existing Route Kolkata- Siliguri.
  • NH Works of INR 19000 crores are currently in progress in the state of Assam. Further works of more than INR 34000 crores covering more than 1300 kms of NH will be undertaken in the state in the coming three years, she shared.

The FM announced that an enhanced outlay of INR 1,18,101 crores for the Ministry of Road Transport and Highways of which, INR 1,08,230 crores is for capital- the highest ever provided.

New Voluntary Scrappage Policy Announced:

The FM announced a new voluntary scrappage policy to phase out old vehicles, the details of which would be unveiled later.

Asset monetisation:

“A national monetising pipeline will be launched and a dashboard will be created to overlook the progress”, announced Ms. Sitharaman.

“Monetising operating public infrastructure assets is a very important financing option for new infrastructure construction. A national monetisation pipeline will be launched, with a dashboard to track the progress and provide visibility to investors,” she says.

I am also providing an enhanced outlay of INR 1,18,101 crore for ports and highways, she said.

The FM also announced that Air India divestment to be completed in the next Financial Year.

INR 15,700 cr for MSME has been announced for the MSME, which as the FM remarked, is more than double of what was announced last year.

The National Logistics Policy announced by the FM last year did not find any mention in this year’s speech.

Industry Reactions

Government’s focus on capital expenditure and infrastructure development will be a shot in the arm for the warehousing and logistics sector in the country. The proposed Development Finance Institution will act as a provider, enabler, and catalyst for infrastructure financing. Also, the budget has earmarked a sharp increase in capital expenditure at Rs 5.54 lakh crore in 2022, from Rs 4.39 lakh crore in 2021. A planned boost to road infrastructure across the country and seven port projects will aid in job creation and income generation. Overall, the large-scale infrastructure augmentation coupled with asset monetization program of core infrastructure assets will go a long way in realising the national infrastructure pipeline, thereby benefiting the logistics sector.”

~ Anshul Singhal, Managing Director, Welspun One Logistics Park

The revised definition of small businesses is positive as it will reduce red tape and administrative overheads for businesses until they reach a sensible level of scale. This is pro-growth. The new highway project announcements are welcome and will boost intra-state trade and commerce while checking inflation.”

~ Mithun Srivatsa, CEO & Founder, Blowhorn

We expected the government to bring Fuel under the purview of GST which would have transformed the Indian logistics sector. Moving forward, we hope that the government will lay more focus on the increasing use of digital technologies and automation.

~ Abhik Mitra, MD and CEO, Spoton Logistics

For the EV industry, it’s been a bit of disappointment with no direct mention of any EV focussed initiative or policy including FAME. There were a lot of expectations from the budget including ramping up of charging infrastructure, enablement of retail financing for EVs, and moderation of the inverted GST tax structure with lowering taxes on EV input components including battery.”

~ Deepak MV, Co-founder & CEO, Etrio

The INR 1.15 thousand Crore allocation for railways, plan to privatise airports in tier 2 and tier 3 cities and completion of 8,500 Kms of strategic highways by March 2022, are all efforts in the right direction, to bring down the cost of logistics and transportation. Further, the development of Eastern, Western, East-coast, East-west and North South dedicated freight corridors, is set to give a boost to logistics and supply chains across the country, improving connectivity and bringing down the costs.

~ Aditya Vazirani, CEO, Robinsons Global Logistics Solutions

The budget focuses on infrastructure development and increased investments. An increase in the fiscal deficit is a bold step to boost the economy. The 137% increase in healthcare expenditure will help India win the battle against COVID-19. We praise the government’s focus on the MSME sector that benefits the whole MSME industry. The continuing increase in diesel taxes has a negative impact for the logistics industry.”

~ Ishaan Singh Bedi, CEO-Synchronized

The allocation of Rs 1.18 Trillion in Budget 2021-22 and the announcement of over Rs 2 trillion worth of highways in 4 states is a welcome move for smoother logistics and transport. Benefits of these will be reaped by Tier-II and smaller cities and will allow better connectivity to every nook and corner of the country. We are very happy to see such steps and hoping for an even better implementation.

~ Pushkar Singh, Co-Founder and CEO, LetsTransport

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