Logistics sector receives much-awaited infra status
The logistics sector has finally received infrastructure status by the Indian government. The move is expected to help the sector attract more funding at competitive rates. Amending the existing framework, a notification issued by the Department of Economic Affairs (DEA) has widened the category of infrastructure sub-sectors to “transport and logistics” from the earlier sub-head of “transport”. Receiving infrastructure status would also help secure the sector – largely comprising small and medium enterprise (SME) – secure credit on a long-term basis. The definition of logistics includes industrial parks, warehouses, cold storage and transportation companies. According to the notification issued by the government, logistics infrastructure includes multimodal logistics parks comprising inland container depots (ICD) with a minimum investment of Rs 50 crore and a minimum area of 10 acres. Further, a cold chain facility having an investment of at least Rs 15 crore as well as warehousing facility with investment of minimum Rs 25 crore would come under logistics infrastructure. In both cases, the facilities should also have a minimum required area. Read On ..
Both small and large companies welcomed the move.
Deepal Shah, CEO, customs clearance and freight forwarding at Avvashya CCI Logistics Private Limited, told Tradebriefs the government’s decision to accord infrastructure status will boost competitiveness which will transform logistics into a sunshine industry. He said, “This will lead to better access to funds and consequent rise in investments for industrial parks, warehouses and transportation, providing a major fillip to consumption. Growth in consumption will significantly scale up manufacturing growth, leading to creation of more jobs. We expect cost of borrowing for logistics companies to come down by 50 bps.”
Avvashya CCI is a joint venture between three respective entities – the warehousing and CCFF division of CCI Logistics Limited, contract logistics division of Allcargo Logistics and Hindustan Cargo Limited.
Agreeing with Shah, Pirojshaw Sarkari, CEO, Mahindra Logistics, also told Tradebriefs that an improvement in efficiency in logistics is the need of the hour for India. He said, “We believe the infrastructure status will reduce the cost of capital in transportation and warehousing, thereby reducing the cost of logistics.”
The cost of logistics is extremely high in India with some estimates putting it at about 13% of GDP, which is higher than the USA (9%) and Germany (8%). The introduction of the Goods and Services Tax (GST) is also expected to be a major driver for this improvement. Post GST, the size of warehouses are expected to increase. In order to serve these large capacities, higher tonnage trucks would be required and this means more and more new investments.
Nailesh Gandhi, President of the Association of Multimodal Transport Operators of India (AMTOI) said, “We welcome the infrastructure status as it will surely provide an impetus for the industry to excel in years to come.”
Besides transport and logistics, the list comprises energy, water and sanitation, communication, social and commercial infrastructure. Roads and bridges, ports, shipyards, inland waterways, airport, railway track, tunnels, viaducts, terminal infrastructure, including stations and adjoining commercial infrastructure are all part of the transport and logistics classification.
- TradeBriefs Bureau -
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