Budget should focus on making Indian logistics sector globally competitive

With a view to making the Indian logistics sector globally competitive, the passage of the Goods and Services Tax (GST) after much deliberations between the states and the centre is a revolutionary move. The ambitious tax reform will not only signal the end of a redundant multi-layered taxation structure but also usher in a single Indian market by eliminating multiple tariff barriers across different states.

A strong infrastructure network in the form of a multi-modal transportation system and improved warehousing facilities can catalyse the seamless movement of goods and services regionally, nationally and internationally. The haulage of containerised cargo by rail should be given a boost through the construction of dedicated rail freight corridors. 

Inland waterways projects should be expedited on a priority basis in the budget through increased fund allocation. The government should speed up the creation of Coastal Economic Regions (CERs) along the country’s coastal areas through the revival of the ambitious Sagarmala plan, aimed at consolidating the country’s coastal supply routes and integrating its waterways. With a higher fuel efficiency ratio, development of coastal routes will allow for ferrying of heavy parcel loads and reduced delivery costs.

Infrastructure at underserved airports located in the hinterlands of the country should be upgraded which will not only reduce the congestion at existing air cargo terminals at international airports but also lead to lesser dwell time. The budget should focus on setting up Air Freight Stations (AFS) on a pan-India basis which will enhance air connectivity to the remote corners of the country, leading to trade expansion and boosting air cargo operations. AFS facilities also need to be deployed at existing container freight stations (CFS). 

The budget also needs to provide impetus to the setting up logistics parks across the country. This will not only simplify the process of procuring raw materials and movement of finished goods, it will also aid in providing specialized services for bringing down operational costs and improving efficiency levels. It is widely anticipated that logistics parks with value-added services like warehousing, cold storage, multi-modal transportation and inland container depots & container freight stations at key locations will lead to logistics savings of around $ 13-16 billion in India.   

Though commendable initiatives have been undertaken by the government for boosting infrastructure growth with the fast-tracking of projects like the golden quadrilateral project, setting up of free trade warehousing zones (FTWZs) along with special economic zones (SEZs), infrastructural development in the country has not kept pace with the stupendous growth of the logistics sector. In order to incentivize infrastructure companies to provide world-class amenities, the government should abolish minimum alternate tax (MAT) that the companies are required to pay on their book profit. This will attract much-needed funds in the infrastructure segment and boost the competencies of the logistics sector.   

Warehousing operations need to be technically upgraded through adoption of technologies like real time locating systems and radio-frequency identification (RFID) for facilitating automated data collection which would simplify the procedure of tracking movement of goods for the warehouse operator. There should be added onus on implementation of warehouse management system (WMS) and other IT-driven initiatives for bringing a paradigm shift in the functioning of warehouses in the country. Digitising warehousing capabilities will not only lead to strengthening of supply chain operations, it will also considerably lower the costs of logistics operations.   

With IT platforms driving the operational guidelines for the logistics sector, there is an urgent need to form an information cell which would relay demand and supply forecasts of container racks at several ports and inland container depots (ICDs) across the country. 

With the country’s economy growing at a phenomenal rate and the logistics sector playing a salient role in sustaining and galvanising the growth momentum, there is an urgent need to formulate a world-class multimodal logistics framework in the country. The government needs to undertake a holistic overview for overcoming the challenges and advancing the competencies of the logistics sector rather than taking a piecemeal approach to individual challenges. 
________________________________________________________________________________________________

Areef Patel is the vice-chairman of Patel Integrated Logistics Ltd