No healing touch for logistics in budget after demonetisation

With a GST roll-out is expected from July, it is justified that the tax reforms were not touched upon. But, he could have done something precious on the regulatory side, especially at a time when the nation is trying create hype around Make in India. One of those wish-lists was infra status to logistics sector to unlock the potential PE and foreign investments, just like what the current budget did for affordable housing. But, yet again, the consolations came only indirect way, which is of course better than nothing.

Any additional thrust and focus on transportation in the budget is a welcome move as far as the logistics sector is concerned. The union budget 2017 has earmarked Rs 2,41,347 crore for the transportation industry. Of this outlay, Rs 1 lakh crore is for the railways while Rs 64,000 crore is going to be provided to build national highways.

The partnership of railways with logistics players for implementing end-to-end integrated transport solutions for select commodities is a definite game-changer for the domestic logistics sector and will usher in seamless movement of goods and services. 

The increase in budget allocation for highways and the identification of 2,000 kms of roads for boosting coastal connectivity will ensure increased connectivity with ports and far-flung villages, expanding the operational framework for logistical companies and improving last-mile deliveries at affordable costs. The move to develop strategically located multi-modal logistics parks with multi modal transport facilities has the potential to make our economy globally competitive. 

With a coastline of over 7,400 km and a road network of over 60 lakh km the sector has not been able to utilise the resources to its capacity. This is mainly because of lack of effective use of funds and poor regional connectivity. Poor road network in tier II & III cities is one of the biggest encumbrance for the economic growth. This budget has addressed to this issue by allocating over Rs 19,000 crores for developing the rural network. More than 40 percent of the traffic moves through the network of highways in the country and their presence in the country is a negligible below 2 percent hence the move by the government to build 2000 km of roads in the coastal line will be recurrent phenomenon.

But, it did not have is a clear road map for implementation and timely completion of several projects like the Dedicated Freight Corridors, a deadline or milestone for conversion of state highways in to national highways and reforms like the land acquisition bill and the historic GST Bill. 

Land acquisition will be a big area of concern when it comes to acquiring acres of land for new construction in railways and roadways. Several cargo terminals and highways announced by state government has not seen the light due to several hindrances created by local authorities. 

Rural development will only be possible through better connectivity of roads and railways as India’s next push for the economic growth will be stirred by the rural consumption which will definitely go up as the market is reaching out to them in the form of E-commerce and digital services.

Logistics is a cog in the wheel on which the entire nation will move in the coming years, Make in India will only happen if Move in India is enabled if not to its full capacity but at least to the extent that the sector is competitive. Given the challenges the sector has in its nature which is highly unorganised and depends highly on cash liquidity, it is important to ensure adequate measures are taken to spur the growth mainly in administration front like timely implementation of GST and other tax reforms which can trim out the alternate tax system and bureaucracy.

GST coupled with better infrastructure will definitely bring down the operating costs in logistics sector which alone will make the sector competitive as interstate transport will be smooth and efficient and the customers will get a better value for their expenditure.

So, now the roadmap has been laid by and large to improve the infrastructure which defines edifice of a country. Lot depends on the implementation within the deadline. With the country’s ‘Lifeline’ in good shape and a robust GST system, the logistics sector can also look for a better future, no matter it did not any direct sops or booster doses.

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