What Logistics industry is expecting from Modi 2.0’s first Union Budget

India’s declined score in World Bank Logistics Performance Index (LPI) has set the expectations of the logistics industry for enabling policies, tax incentives and push to infra reforms from Modi 2.0’s first union budget of 2019-2020. The budget will be presented by Nirmala Sitharaman, Union Finance Minister in parliament on July 5.

In 2018 India ranked on 44th position, a decline of 9 places from the previous rank of 35thposition in 2016. In 2014, the country ranked 54th in the LPI of World Bank.   

It was in 2018, the Modi government had made the highest allocation to the transport sector of Rs 1, 34, 572 crores. The government expects the logistics industry to grow up to $360 billion by 2032 from the current $160 billion. The logistics sector is expected to create one million employment opportunities by 2021.

The logistics industry experts hope an infrastructure push along with rationalisation of tax structure for the industry in the forthcoming budget besides penetration of information and communication technology and skill development in the industry.

“Union Government must allocate more funds for dedicated freight corridors, logistics parks etc. Sops  like interest subsidy, reimbursement of part of capital investment, stamp duty exemption and exemption of tax on electricity should become a part of National Logistics Policy”

– Anshuman Singh, Chairman & Managing Director, Stellar Value Chain Solutions

On digitalization front, Mr Singh said, “Germany, Singapore, Hong Kong and the US have showcased successfully the usage of digital transformation which has benefited their entire logistics value chain leading to higher ranking in Logistics Performance Index. By digitalisation of certain key accounting, billing and logistics processes, the government can ensure greater levels of compliance.”

The industry also hopes on the roll-out of the National Logistics Policy that entails an Integrated National Logistics Action Plan, which would serve as an optimised master plan to define logistics’ priorities across various Ministries, including Road Transport Highways and Shipping, Railways, Civil Aviation, Department of Posts and user ministries such as Coal, Steel and Mines.

“There is an urgent need to improve the investment environment in the logistics infrastructure sector. We expect that the government should take keen steps to reduce the disparity between road and rail prices latter being too high. Also, we would like to see closer coordination between government agencies that work alongside customs adopting proper risk management systems while maintaining international standards of operations.”

– Steve Felder, Managing Director, Maersk – South Asia

Mr Felder has full confidence in the Modi government’s enabling policies and says, “As the government continues its 2nd consecutive tenure, we are confident that there will continue to be good economic growth and performance leading to progress in the Shipping & Logistics sector; with focused efforts focused at the improvement of infrastructure at ports as well as roadways and the further development and implementation of inland waterways.”

“National Waterways – 1 has 4 main and 19 floating terminals that are used for operations. We hope to see an increase in usage of multi-modal logistics through the Government’s investment towards the development of National Waterways. The Sagarmala Project has driven positive impacts, and we expect to see continued progress in this regard from the new government,” concludes Mr Felder.  

Experts said the logistics industry, with its potential for empowering economic growth, should be on the top of the agenda for the new government. The Indian logistics industry is expected to grow by 9–10 per cent per annum over the medium term, the ICRA had projected last year.

Implementation of GST has completely changed the way the industry used to pay taxes to the government. With this paradigm shift in taxation, several bureaucratic hurdles have become thing of the past and ease of doing business has improved significantly.             

Still, it is grappling with quite a few operational inefficiencies. It is only by providing the right kind of infrastructure with proper forward and backward linkages along with taking the help of evolving information technology, that the logistics challenges can be handled.

“We are looking forward to some rationalization of taxation. The input credit norms for warehouse construction and operations needs to be relooked, presently, there is an accumulation of input tax that leads to the high incidence of tax on warehousing services.”

– Rajesh Jaggi, Managing Partner – Real Estate, Everstone Group

Mr Jaggi further adds, “With digitalization coming to the fore in almost every sector, warehousing and logistics is gearing up for an in-depth adoption of digital technologies. We hope the budget incentivizes the adoption of various technologies in the logistics sector, this would help us to keep pace with the international standards of packing, material handling, WMS, etc. and will drastically improve the efficiency and effectiveness of the sector as a whole.” 

The cargo transportation modal mix is currently very much skewed in favour of roads. As per a research report released by Mckinsey, of all the goods transported by volume, roadways constitute 57% of the goods resulting in underutilization of the other cost-effective modes like railways, coastal shipping and inland waterways.

Inefficient connectivity network causes huge loss to the perishable goods as many times perishable items get spoiled in-transit due to the high lead time of cargo movement.         

Efficient logistics will not only provide better and cheaper mobility but also deliver quick and substantial employment opportunities to semi-skilled and skilled job seekers. The industry can also provide critical mass to make India a superpower in artificial intelligence.

The story is co-authored with Gaurav Dubey

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