Logistics push: Budget should focus on port connectivity and warehouse consolidation for higher growth

The present government has showcased bold initiatives in their endeavor to reinforce positive direction for the economy. India has climbed up 16 ranks to be at the 39th place among 138 countries as per the World Economic Forum’s Global Competitive Report 2016-17. A sign that present governance is bearing good results.

Besides, the demonetisation move of the government, we are hopeful that keen attention would be paid to align various initiatives that will bring cheer to the sector and the economy. We have high expectations for investments in infrastructure, implementation of Good & Services Tax (GST), development of digitalisation and simplifying tax procedures for the logistics sector.

Recently, a lot of push has been seen to develop port infrastructure and port automation to ensure reduction in delays, cost effectiveness and operational efficiencies. Upcoming days will see a lot more focus on the The Sagarmala project. An area that needs to be addressed is development of industries in and around the ports. Development of industrial corridors will ensure there is cargo both ways and customers enjoy the benefits of reduced costs. Subsidies, low tax zones, and other incentives could be of great help.

Representational image - Reuters

Representational image - Reuters

Also, the budget should focus on investments to ensure connectivity to and from ports for first mile and last mile delivery. These factors play a significant role in reaping the actual benefits of coastal and inland shipping. The implementation of Goods and Service Tax (GST) will also make major changes and will play a vital role in Budget 2017. GST would bring about consolidation of warehouses which would now be set up closer to the area of consumption. This also calls for greater negotiation power in the hands of logistics players. For instance, the cost to set up 2 warehouses of 30,000 sq m is far lesser than having 6 warehouses of 10,000 sq m each.

Besides, GST would ensure free movement of goods across borders, eliminating delays at various checkpoints. This ensures optimum utilisation of transportation, shorter lead time, cost and operational effectiveness, which will directly benefit customers. Post the successful rollout on 1 July 2017, the Centre and states will have to work in great sync to make the most of GST and derive mutual benefits.

While the budget is expected to put maximum emphasis on enhancing the country's digital economy we are hoping the government also announces schemes for investment in technology for information and data sharing. This will lead to quicker delivery time and efficient data management.

Sectors like FMCG, auto, transport, agriculture and other seasonal export businesses have been impacted due to the demonetisation. We are hopeful that the government will offer some ease by offering corporate tax sops and simplifying tax procedures for the logistics sector.

Overall, the budget is expected to be in favour of corporate India and to restore positive sentiments in the economy.

(The writer is Joint Managing Director, Allcargo Logistics Limited)

For full coverage of Union Budget 2017 click here.

Published Date: Jan 27, 2017 16:27 PM | Updated Date: Jan 27, 2017 16:27 PM

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