Budget 2023: What the industry is looking forward to

The Union Budget 2023-24, would be tabled at the Parliament on February 1, 2023. In light of the same, the Union Finance and Corporate Affairs Minister Nirmala Sitharaman, in November, chaired a week-long pre-budget consultation meeting virtually. More than 110 invitees, representing 7 stakeholder groups, participated in 8 meetings scheduled during this period.

The stakeholder groups include representatives and experts from the agriculture and agro-processing industry; infrastructure, and climate change; financial sector and capital markets; services and trade; social sector; trade unions and labor organizations, and economists.

As the Government plans the Union Budget 2023-24, we take a look at what the logistics and supply chain industry expect from FM Sitharaman. 

Over the past few years, the logistics sector has been grabbing extra attention from the government and growing at a fast pace, expanding at a 15% compound annual growth rate (CAGR) in revenue and likely to grow at an even faster pace in the next five years.

While the Center has been keen and working proactively to improve the efficiency of the logistics sector in India, there is a need for more such initiatives. Industry stakeholders are expecting the government to announce more measures that will fuel its growth.

Giving the gist of the industry’s expectations from the budget, Mr. Vineet Agarwal, MD, TCI said, “We expect the forthcoming budget to provide a balance between the economic growth priorities and inflation concerns, in an all-encompassing manner. The momentum of growth that India has come up with post the pandemic cannot be weakened. We believe that the budget 2023 will be very carefully structured to sustain the growth momentum and continued infrastructure development, irrespective of the ups and downs.”

Mr. Lalit Das, Founder 3SC Analytics added, “The FM can address the challenges faced by the logistics sector in several ways in the Budget 2023. One of the key ways is by ensuring easy funding availability to start-ups in the sector. The finance minister can also consider providing tax rebates to start-ups in the logistics sector, which can help these businesses to reduce their costs and increase their competitiveness. Another way to support the logistics sector is by emphasizing the importance of enhancing the digital ecosystem. In addition, the finance minister can consider providing a rebate for those involved in exports and bringing foreign currency into the country. This can encourage more businesses to participate in international trade, which can, in turn, help unleash export opportunities for the logistics sector. Finally, the finance minister can also focus on promoting more foreign direct investment (FDI) in the logistics sector, which can help bring much-needed capital and expertise.”

NATIONAL LOGISTICS POLICY

Announced in the previous budget, the National Logistics Policy was much awaited by the industry and gathered quite an applause. Now the industry expects the government to double down on the execution of measures that were suggested in the policy.

“Exports will continue to be one of the big contributors to India’s economic growth in 2023-24 and the logistics and supply industry will be a key component to that. We expect this budget to focus on lowering the costs for the logistics industry, especially by implementing the National Logistics Policy (NLP) that was launched in 2022. To further integrate India into the global supply chain, the government could look into the synergy between the main modes of transport, thus achieving the multi-modal model for supply,” said Rajesh Kapase, CEO, TrackOn.

Hoping that NLP will focus on cost management, Cyrus Katgara, Partner, Jeena & Company expressed his expectations of getting a tax incentive on tech considering the paramount importance they hold in the NLP. He said, “Firstly, an announcement of a tax incentive on capital expenditure for the expansion of new-age technologies like artificial intelligence (AI), machine learning (ML), and internet of things (IoT) as innovation and technology hold paramount importance in the National Logistics Policy (NLP). Having said that, we are most likely going to witness the implementations of the NLP in this budget wherein cost management in the logistics sector and easing of several bottlenecks will be the focus areas.”

The experts are expecting the budget to kick start the project and ensure it moves in the desired place while emphasizing every aspect of the policy.

ULIP

Announced in the Budget 2022, the logistics industry is looking forward to taking advantage of the Unified Logistics Interface Platform (ULIP) in 2023.

“We are looking at the faster implementation of Unified Logistics Interface Platform (ULIP) as it would improve interoperability reduce cost and improve efficiency in the logistics sector, leading to a cleaner and more sustainable future for all”, Prasad Sreeram, Co-Founder and CEO, COGOS.

Integration of ULIP will increase collaboration and improve efficiency in the industry.

ELECTRIC VEHICLES: DRIVING SUSTAINABILITY

It is not unknown that sustainability has become the top priority, among the many steps towards sustainable operations, the government of India has also pushed the adoption of EVs in the last year or two by offering subsidy schemes like FAME and improving Electric infrastructures. Many logistics companies have already begun to make a shift towards sustainability and in 2023 the sector will further its EV adoption.

“EVs have lived through a slow but steady journey over the last few years. With the support of some very impactful policies of the Government, EVs have now started to see accelerated adoption resulting in better seeding of the sector by all participants. 2023 is expected to be the year when a lot more EVs with better battery ranges will hit the roads and the Indian user is showing increased adoption of EVs. In the new budget we wish that the Government waives off toll taxes on EVs to further accentuate the use of EVs across state borders thus promoting cleaner fuel use for intercity transportation,” Mr. Varun Gada, Director, LP Logiscience – A Liladhar Pasoo Company said.

Speaking on the same lines, Dr. Amitabh Saran, Founder, and CEO, Altigreen said, “We want GoI to take cognizance and expect an extension of the FAME-II scheme for 3-wheelers similar to the one given to two-wheelers. After all, it is the livelihood of the 3W owner that we will be impacting. The Indian e-commerce space is booming, providing the tailwinds for the rising demand for EVs for last-mile delivery. Commercial banks need to be pushed to step in with financing support and reduce interest rates. We also look forward to the rationalization of GST rates. Currently, 5% GST is levied on EV sales but OEMs pay 28% GST for spare parts. Bringing them under the 5% bracket can lead to a price reduction and an uptick in EV adoption (lower service costs). Range anxiety is one of the major challenges that have to be addressed by developing a robust charging infrastructure. We hope the government will provide more CAPEX subsidy (up to 40-50%) to install/set up charging infrastructure across India.”

If these expectations are met in the budget 2023, it can help speed up the adoption of EVs for commercial purposes and resolve the last-mile delivery problem.

WAREHOUSING

The warehousing sector has been performing well compared to the rest, in an unprecedented fashion. Moving on in 2023, the warehousing sector is looking to accelerate digital adoption, embrace greener practices that match international standards, and drive value-added collaborations with the manufacturing sector.

Citing his expectations from the upcoming budget, Mr. Varun Gada, Director, LP Logiscience – A Liladhar Pasoo Company says a focus on the following aspects will be beneficial for the sector:

1. Reduction in Steel duty/ prices for industrial warehouse construction would be beneficial as up to 50% of the cost of construction of a warehouse is attributed to steel as a major component.

2. Enhanced focus on improving the road transport infrastructure which can help decongest the existing warehousing hubs, reduce rentals and unlock better value for land available for warehousing.

3. The government can additionally consider capital subsidies for the construction of grade-A warehouses in smaller towns.

4. Better Public-Private Partnerships to the setup of multi-modal logistics parks with better connectivity to new expressways.

5. Reduction in solar panel import duties to help reduce Capex investments and a re-look at the tax structure and subsidies for environmentally responsible practices

6. Easier and attractive loans/ access to funds for tech adoption and setting up smart warehouses, especially for the Cold storage and specialty warehousing segment

7. A focus on easier access to investment for industrial warehousing, including simpler processes for FDI, would be appealing in the 2023 budget.

COLD CHAIN

Growing rapidly, post COVID-19, the Indian cold supply chain industry in 2021, was valued at USD 24.62 Billion, and it is expected to reach USD 53.07 Billion by 2027, growing at a CAGR of 13.66%. Despite the exponential growth, the sector remains fragmented at large, leading to wastage of approx. 40% of the over 400 million MT of perishable food!

Mr. Swarup Bose, Founder & CEO of Celcius Logistics believes a renewed and closer look at Cold Supply Chain would benefit in cutting losses and improving the hunger index while also empowering agriculture, food & dairy, and process food sectors, along with pharma and healthcare.”

 He further mentions a few considerations that could go a long way.

– Capital support/FDI for technology adoption: The huge capital investment required for digital adoption in the cold supply chain sector, is a massive challenge. With provisions for FDI and/or capital support, it will be easier to bring in the best in tech innovations that can be applied across the cold supply chain and truly empower all stakeholders to embrace smart tech.

– Tax holidays/subsidies for critical cold storage: Temperature-controlled warehousing is an investment intensive yet one of the most crucial aspects of the cold supply chain and a lot of logistic service providers/ farmers/ intermediary stakeholders end up compromising on product quality due to a lack of access to efficient cold storage. Subsidies focused on the unique cold storage needs for sectors like fresh foods, dairy, meat, and other frozen and processed food as well as pharma products and intermediaries would go a long way

– Public Private Partnerships for agriculture cold supply chains: A country battling high hunger rates cannot afford to lose 40% of its food to logistics issues. Healthy Public Private Partnerships can help easier access to effective cold supply chain infrastructure which can help farmers and the government to drive efficient food distribution and improved quality of produce.

AND MORE

Apart from this, the industry is expecting a focus on skill development and training. Mr. Aggarwal says that emphasis on upskilling programs like Gati Shakti Vishwavidyalaya will help the logistics sector contribute its best in India leading the Industrial Revolution 4.0 & 5G era.

Mr. Katgara speaking further on it said, “Employment focus through more allocations towards the rural employment scheme as well as skill training and upgradation which will help make our Indian job market more diversified and inclusionary in nature creating maximum job opportunities for our youth and lastly”

Furthermore, the industry is expecting an increased focus on the effect of developments in e-commerce which will lead to more efficiency and better access to the global market.

Mr. Nisschal Jaain, Co-founder and CEO, of Shypmax, says, “With the upcoming budget, the Indian e-commerce logistics sector is expecting some clarity on the de-minimis (threshold) value. Currently, the de-minimis value for India for e-commerce import is zero which means that all orders into India, regardless of value, will often incur GST on their shipments.”

Adding on he said, “In the 2022-23 Budget, implementation of a simplified regulatory framework to facilitate the export of jewelry through e-commerce was introduced, however, it was limited only through ECCS (Express Cargo Clearance System) at ICT Mumbai, ICT Delhi, and ICT Jaipur, according to Central Board of Indirect Taxes and Customs (CBIC) SoPs. Stakeholders are awaiting more details on the same from the upcoming budget. Additionally, the limit of INR 5 lacs worth of exports via courier under CSB-V, which affects the fine jewelry’s export, is counterproductive and confusing for the e-logistics players as well as the exporters.”

As the 2023 Budget approaches, we hope the government addresses the pain point of the industry, focusing on the measures, and boosting the efficiency of the logistics and supply chain industry.

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