Union Budget 2022: Hitting the sweet spot in the development of logistics industry

Post By : Rachayita Sidharth
Post Date : February 2, 2022
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Reading Time: 6 minutes

The Indian logistics and supply chain industry has been bearing the brunt of COVID-19 repeatedly due to lockdown restrictions and has been on a rather varying recovery trend in the last two years. Even though the third and most recent wave of the pandemic was somewhat moderate, the freight movement numbers did not look much promising. However, overall the impact was cushioned to an extent by the continuation of industrial activities and less stringent lockdown.

This year’s Union Budget, presented by Finance Minister Smt. Nirmala Sitharaman yesterday, has hit a sweet spot in the recovery & development of logistics industry in India. The Prime Minister Gati Shakti Plan will continue to play an enormous role in the sustainable economic development of the country, supported by seven engines for transformation, multi-modal connectivity and efficient logistics network. Development of the Indian supply chain & logistics industry will scope out to roads, rail,  ports, airports, waterways, mass transport and logistics infrastructure. She also mentioned that out of the 35 MMLPs planned by the Government on PPP model, contracts for 4 will be awarded in the next year.

The focus will be on planning, financing including through innovative ways, use of technology, and speedier implementation. The touchstone of the Master Plan [under PM Gati Shakti] will be world-class modern infrastructure and logistics synergy among different modes of movement — both of people and goods — and location of projects. This will help raise productivity and accelerate economic growth and development.”

~ Smt. Nirmala Sitharaman, Finance Minister

The FM also stressed on adding another 25,000 kilometers to the National Highway network and establishing 100 PM Gati Shakti Cargo terminals in the upcoming years. With this effect, the Ministry of Road Transport and Highways saw a share of INR 1,99,107.71 crore (68% increase) set aside for it, out of which INR 81,006 crore will be allocated entirely to NHAI (133% increase). The Government is also planning to finance road development projects through innovative financing to an extent of INR 20,000 crore, which will supplement the public investment in the sector.

Covering other aspects, the minister threw light on the Government’s plans for railways as a key instrument in Indian logistics. The Railways is set to develop newer and better products and services catering to small farmers and MSMEs, along with its participation in seamless transport of parcels through the country.

On the tech front, the FM announced the implementation of a Unified Logistics Interface Platform (ULIP) designed for Application Programming Interface (API) for seamless flow and exchange of data between operators of different modes of transportation. It is touted to reduce the overall logistics time and cost while taking tedious paperwork processes out of the picture. It is also expected to help Indian logistics service providers to gain insight into the real-time situations and better international competitiveness.

Let’s take a look at what opinion do the stakeholders have on this year’s Budget.

Mr. Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers

“The Union Budget 2022-23 is forward-looking and focuses on a long-term plan for the country with digitization, urban development, and sustainability at its core. The Budget made several announcements to spur the growth of the logistics sector in the country. The government repealed about 1,490 union laws in recent years, paving the way for improving ease of doing business. The government also plans to launch ‘Ease of Doing Business 2.0.’ This should include more dynamic aspects and make India a more investment-friendly destination.”

Mr. Aditya Kale, Founder & CEO, Imperial Logistics

“The budget announcements were in line with expectations. The fund allocation for setting up national highways and setting up more economic corridors across various states will surely help the efficient last-mile deliveries and simulate regional economies to encourage local entrepreneurial initiatives.”

Mr Anurag Mathur, CEO, Savills India

“The budget has taken a commendable position of increasing the expenditure significantly in order to boost demand and investment. However, there are long term gains wherein the focus on creating a broad based platform for manufacturing and R&D should create newer avenues for investment and development. In addition, there was significant focus on urban capacity building, digitisation of land records and new proposed SEZ law that will enable states to partner in existing and new exclaves to enhance exports.” 

Mr Vikas Singhania, CEO, TradeSmart

“A short and sweet budget by the finance minister with no tweaks on taxes but a lot of measures to promote overall economic activity. The budgetary capex has been increased by 19% while at the same time providing impetus to EVs, solar power and renewable energy, agriculture, blending of fuels, startups, the introduction of digital currency, giving legitimacy to cryptocurrencies and green bonds all point towards the government sticking to the growth path. Road construction was given a boost by increasing the target to 25,000 kms of National Highways construction. Comparing this to the current construction of around 13,000 kms the target is almost double than the current level. Also, bringing all key transport ministries under the Gati Shakti plan is a positive step for the logistics sector.” 

Mr Bhavik Chinai, Group CEO, BVC Logistics

“The government’s deep focus on tech-driven change is admirable. Gati Shakti network impetus with about 100 cargo- terminals and 4 new National Logistics Parks will help boost Industrial growth and Atmanirbhar Bharat. The battery-swapping policy with interoperability is a welcome introduction toward sustainability. Expansion of SEZ’s advantages to existing infra through new legislation is promising for the G&J sector. Alongside, the Customs National Portal with a promise to facilitate customs clearance digitally will reduce the transaction costs in jewelry exports by over 20%. The reduction in polished diamond import duty is deeply appreciated. Overall, the Budget 2022 is very positive and we look forward to quick execution of the digital initiatives.

Mr Richard Theknath Chairman & Managing Director, Jet Freight

“Jet Freight’s plan to focus on engaging more electric vehicles for its last-mile deliveries to reduce carbon emissions is in line with the budget’s blueprint for formulating a growth path and further emphasizing on go-green initiatives. The Battery swapping policy will encourage e-commerce players to opt for EVs as a preferred choice for meeting their delivery requirements in an eco-friendly way. The launch of a Unified Logistics Interface Platform to ease data transmission between the stakeholders in the logistics sector will bring efficiency in the movement of commodities by reducing travel costs and time. Even the building of adequate EV charging stations will be a significant growth driver for change in the logistics sector and enable us to expand our operations beyond the city limits of Mumbai and Pune. The Gati Shakti Masterplan for expressways, 100 new cargo terminals for multi-nodal logistics, and the development of urban metro systems will give a big boost to new warehousing and logistics facilities across the country.”  

Mr Rajesh Jaggi, Vice Chairman – Real Estate, Everstone Group

“It is encouraging to see that improving India’s logistics infrastructure has been a key agenda for the ruling government. In support of the government’s vision, the Union Budget 2022-2023 has prioritized the logistics sector and extended further impetus for growth. The Finance Minister’s focus on the Gati Shakti plan is quite constructive. The plan for expressways, construction of 100 new cargo ports for multimodal logistics parks, along with urban metro systems expansion –  all of this will help spur the development of new storage and logistics facilities across the country. This will further help in lowering logistics costs. Therefore, we feel that there is immense potential and scope to drive demand in the warehousing and logistics industry.”  

Mr Aneel Gambhir, CFO, Blue Dart 

“We are pleased to note that the Union Budget is progressive, focuses on growth and is in line with our expectations. The Government’s focus on consistently investing in infrastructure development across the country bodes well for the Indian economy and more specifically for the logistics industry. We must also recognize the push for utilizing and promoting a digital ecosystem, whether that be with the launch of Gati Shakti and the numerous opportunities it initiates or the adoption of eVehicles; it further streamlines systems and processes, propelling the idea of Aatmanirbhar Bharat. 

Mr Soham Chokshi, CEO and Co-founder, Shipsy

The Union Budget for the upcoming fiscal year seems strongly aligned to stepping up investment on infrastructure and digitalisation. The budget looks promising to put the growth trajectory on a firmer footing as the economy recovers from the Covid-19. Creation of jobs, stronger push for digital education, greater focus on mental health wellbeing, and readiness for new-age technologies such as blockchain and 5G services, we believe are all steps in the right direction. Also, the plan to set up a Digital University to ensure world-class educational standards means we will have greater access to talent capable of handling disruptive technologies like AI, ML, predictive analytics, IoT, and more. The announcement of building a ‘Drone Shakti’ programme will take India closer to her ambition of powering everyday deliveries using drones. Another step towards making logistics sustainable. 

Mr Anjani Mandal, CEO of Fortigo Logistics

The government’s intent to reduce the cash cycle for suppliers by facilitating eInvoicing, electronic Bill-Presentment & faster turnaround in electronic Payments will further improve ease of doing business. The proposed support for Start-up Investments & Investors will also be an important force in driving digitization, productivity & organizing the industry.”  

Mr Anshul Singhal, Managing Director, Welspun One Logistics Parks 

“The Union budget presented by the Honourable Finance Minister highlighted a vision of a brighter and more digitally advanced country. The focus on multimodal connectivity through the PM Gati Shakti program between mass transport and railway stations, 100 New Cargo Terminals to be developed in the next 3 Years, expansion of highways and railway development projects give us more confidence to invest in the sector and build Logistic Parks. A completely paperless, end-to-end online e-Bill System will help enable the suppliers and contractors to submit digitally signed bills, reduce costs and track their status from anywhere. Overall, from a sectorial point of view, the next cycle looks even more promising not only for the Indian infrastructure but also for sectoral investments.”

To conclude, there is a long way to go on the path of recovery, however, the Union Budget 2022 brings good news for the logistics and supply chain industry. It fuels the industry’s aspirations of making a mark on the international front. The Government has been generous in allocating funds towards the development of a strong logistics network and covers almost all domains that make a contribution to it. Expectations regarding cargo movement, data exchange, sustainability, digitization and other aspects of logistics infrastructure development have mostly been met and overall the stakeholders are jubilant about it.

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