Wish-list of Logistics Industry from Budget 2015

Logistics Expert and CEO of Softlink Global, Mr. Amit Maheshwari, voices the expectations of the industry from upcoming budget

The advent of 2015 marks the beginning of the new era where the government would try its best to clear the obstacles that come in the way of doing business, attracting more investment and generating employment. Expectations run high in the Logistics sector from the upcoming budget and also the recent ‘Make in India’ campaign. The Indian logistics industry is currently plagued with poor infrastructure and high costs. However, it is going to turn around on the back of robust GDP growth, globalization, FDI in logistics and increasing government support.

The biggest expectation of logisticians is the Recognition of Logistics as an Industry which will help in creation of transparent policies towards overall development of this sector. It will also boost the investment in logistics and allow easy options to generate finance from banks instead of expensive private funding. After being recognised as an industry, logisticians can expect that strict guidelines and rationalization of regulations will be followed by all service providers and on matters related to payment defaulters within the entire supply chain. Due to the inefficiency from the side of the payment defaulters there can be an obstacle in the smooth execution of the supply chain and handling of goods leading to higher cost and inefficiencies. Thus, making Defaulters more accountable will safeguard the interests of LSPs.

The Logistics Companies wish that the government in its upcoming Budget shall necessarily give the final go to the much-awaited Goods & Service Tax (GST) rollout plan which is imperative to shed state level barriers and simplify the tax structure. GST will create a single unified Indian market for the logistics industry. It will make them competitive to meet the international standards of cost of inventory holding and transaction cost, which is one of the major weak links in global competitiveness of Indian logistics companies.

The provision for proper infrastructure is another important expectation of the logistics industry which includes development of a better transportation system and setting up of warehouses. The Introduction of additional Railway tracks to ensure no piling up of containers at inland ports. Better infrastructure at metro cities along with development of major airports as cargo hubs will supplement India’s growing EXIM (Export-Import) trade. Increased allocation for creating the inland waterways project and also pushing forward to revive the Sagar Mala plan for coastal areas is a must.

The development of Logistics parks across the country for speedy delivery is another expectation of logistics companies. The creation of industry clusters and corridors will also provide infrastructure for major improvement in logistics activities. The logistics parks will provide services and facilities to reduce costs, boost efficiency and improve the flow of both raw material procurement and finished goods. The NDA government has already taken some valuable initiatives which are beginning to make its presence felt by focusing on infrastructure development. Examples of which include the push for golden quadrilateral project, east-west and north-south corridors, Free Trade and Warehousing Zones (FTWZ) in line with Special Economic Zones (SEZ). These Special Economic Zones are encompassed with 100% Foreign Direct Investment (FDI) and public-private partnerships (PPP) in infrastructure development with the abolishment of MAT on Infrastructure companies.

The logistics industry further hopes that the government comes up with a clear incentive plan for funds from private equity firms, strategic investors and public listing in order to finance massive expansion in warehouses. Plans should be made for the investors (venture capital/PE Funds) to fund logistics as a specialized industry. There is also a need to provide fiscal incentives towards financing and training and human resource development programs. The budget should envisage availability of long term (more than 10 years) and cheaper debt.

Additionally, the following points are the major wishes that the government must take into consideration:

• Facility of a single window clearance for permission prior to the exports of products to simplify processes, reduce documentation and ambiguities on the customs regulatory front.
• The removal of 25-30% of custom duty levied on fuel used by Indian ships and solving other logistical hurdles to push for more usage of the sea routes for both domestic and international cargo. This will bring down the transportation costs and will also help in quick transportation without any delays in delivery.
• The refined policy of setting up Air Freight Stations (AFS) should be present across the country which will help to boost trade and take into account the interest of private airports. This will also promote international air cargo operations by reaching out to hinterland regions of the country besides de-congesting the congested air cargo terminals in some gateway international airports that face dwell time. The existing Container Freight Station (CFS) should be promoted to have AFS facility and later new independent facility of AFS should be considered.
• The introduction of the Multimodal Transport Policy that would cover road and sea ways. The government should work towards developing waterways, roads as well as sea, rail and airports together.
• Time based hiring of ships for the purpose of Imports to be exempted from payment of service tax. The service tax on freight and all related services should be exempted.
• In today’s IT driven Logistics, the creation of a separate cell to act as information nerve centre forecasting the daily demands and supply of container racks at various ports and ICDs.

All in all, the government should look at logistics with holistic approach instead of focusing on small partial challenges. Being the backbone of the economy, freight and logistics companies have huge expectations from this budget. Ending the year 2014 on a decent note, the Indian Logistics Industry is looking forward to script another success story in 2015 as a year of growth, new investments and new opportunities.