Rail should be an element of logistics

Integration of each arm into the Rs 459,000-crore transport and logistics sector, likely to grow at about 10-15 per cent CAGR till 2015, will be a step towards addressing transportation requirements, writes Vineet Agarwal.

The Indian logistics industry is rapidly evolving as a strategic function beyond mere transportation and storage services to provide end-to-end inte­grated and value added solutions that improve efficien­cies. The government should look at according industry status to the logistics sector which will help the trans­por­ters to avail the benefits of being part of an industry. Cur­rently India’s logistics cost is among the highest in the world—estimated to be almost 13 per cent of its GDP.

There is plenty that the government can do to help: It should look at according industry status to the logistics sector and implement the much awaited Goods and Service Tax (GST). With the logistics boom, there is a need to develop more access-controlled expressways. Ware­housing for non-agricultural commodities should be treated at par with infrastructure projects and should enjoy similar benefits.

Above all, a separate regulatory authority for the logi­stics sector on the lines of the Insurance Regulatory & Development Authority (IRDA) or Telecom Regulatory Authority of India (TRAI) would help coordinate bet­ween the various ministries for an integrated policy for the sector which would lead to the growth of the sector.

Connectivity thrust: The decision to create a sepa­rate Rail­way Research Development Corpo­ration is a posi­tive step. In FY12 the government proposes to develop two new major ports, one each on east and west coasts and build facilities for full mecha­nisation of cargo handling and movement and plans to develop of two hub ports each on west and east costs.

Meanwhile, the Indian Railways has done a separate budgetary allocation for developing special type of ro­lling stock including for automobiles and double stack container movement. The ministry’s step to bring down the operating ratio by 10 per cent within one financial year is a bold step.

Influencing factors: According to the Union Budget 2012-13, the GST will be operational this year. Signifi­cant progress has been made in the conceptualisation and de­sign of the GST Network (GSTN)—a common portal for the Centre and states that will enable ele­c­tro­nic pro­ce­ssing of the key business processes of registration, re­turns, and payments. The implementation of GST will ac­celerate the implementation of the much awai­ted GST.

The government’s plan to come up with a compre­hen­sive policy for further developing PPP projects will improve the infrastructure conditions; however, a speedy single-window approval system is badly needed.

Investment linked incentives under section 35AD are to be extended to Container Freight Stations, Inland Container Depots and warehousing facility for storage of sugar. The existing allowance of deduction of capital expenditure for business of warehousing of agricultural produce and cold chain facility is to be increased from 100 to 150 per cent. CFS/ICD set-ups are expected to benefit from stuffing/de-stuffing services—creating a de­mand for higher density of rail traffic to and from them. The implications: Key policies and infrastructural changes are facilitating tectonic shift in the logistics in­dustry towards improved performance. One such shift is the revolution towards multi-modal logistics parks. This will open up new avenues and opportunities for manu­fa­c­turers, retailers, suppliers, and logistic players to im­p­rove their supply chains. Also, GST imple­mentation is being eagerly awaited by all the companies in the sector.

The government has been encouraging PPP projects in areas such as port connectivity projects, container oper­ations, wagon investment schemes and private frei­­ght terminals. The ministry is in the process of finalising a comprehen­sive draft policy emphasising models for specific cate­go­ries of projects.

In sum, there is a dire need for a consolidated app­roach towards the logistics sector at the policy levelling order to meet the integrated logistics requirements of the sector.

The author is Joint MD at TCI, a major player in the logistics industry.