Infra status: Logistics players hail move, see 50 bps savings

Mumbai: Leading logistics players have welcomed the government's decision to grant infrastructure status to the industry saying the move will help them raise funds at a lower cost which in turn will help reduce the overall transportation cost.

The industry expects the move to lead to a 50 bps gain for logistics players in terms of cost. Welcoming the move, Deepal Shah, chief executive (customs clearance and freight forwarding) at Avvashya CCI Logistics, which is the holding company of the largest private sector player Allcargo, said, "the decision will boost competitiveness which will transform logistics into a sunshine industry."

"The move will lead to better access to funds and a consequent rise in investments for industrial parks, warehouses and transportation, providing a major fillip to consumption," Shah added.

Avvashya CCI Logistics is a joint venture between the warehousing and the CCFF division of CCI Logistics, contract logistics division of Allcargo Logistics and Hindustan Cargo.

"Growth in consumption will significantly scale up manufacturing growth, leading to creation of more jobs. We expect the move to lead to around 50 bps for logistics companies in terms of cost," he added.

Another key player Mahindra Logistics' chief executive Pirojshaw Sarkari said infrastructure status will reduce the cost of capital in transportation and warehousing, thereby reducing the cost of logistics.

"This will provide an impetus for the industry to excel in years to come," he said.

Noting that logistics sector is a core industry that deeply influences all economic activities, he said logistics cost is extremely high in the country with some estimates putting it at about 13 per cent of GDP, which is higher than the US (9 per cent) and Germany (8 per cent).

He said GST rollout is given a major boost to the sector. This alone has reportedly led to a gain of 20 per cent on cost and time for the industry as the new tax regime has done away with border checkposts in the states.

Earlier in the day, the government accorded infrastructure status to the logistics sector, covering cold chains and warehousing facilities with a view to attract more funding at competitive rates.

Amending the existing framework, a notification by the department of economic affairs has widened the category of infrastructure sub-sectors to "transport and logistics" from the earlier sub-head of "transport".

The definition of logistics includes industrial parks, warehouses, cold storages and transportation.

Logistics infrastructure now includes "multimodal logistics parks comprising inland container depots with minimum investment of Rs 50 crore and minimum area of 10 acre".

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. Besides transport and logistics, the list comprises energy, water and sanitation, communication, social and commercial infrastructure.