2015 to script In­dia’s growth story!

After clock­ing an in­flu­en­tial growth in 2014, the In­dian lo­gis­tics in­dus­try is look­ing for­ward to another promis­ing year with great hopes, plans and as­pi­ra­tions. In 2015, the in­dus­try hopes to see GST im­ple­mented. CARGOTALK talks to in­dus­try vet­er­ans from

Cargo Talk - - FRONT PAGE - KALPANA LOHUMI

The In­dian lo­gis­tics in­dus­try closed 2014 on a pity good note, thanks to at­ten­tion given by the gov­ern­ment to the sec­tor. The year saw valu­able ini­tia­tives been taken, es­pe­cially in the air cargo in­dus­try in the form of guide­lines for set­ting up Air Freight Sta­tions (AFS) across the coun­try and the draft of Civil Avi­a­tion pol­icy re­leased by Min­istry of Civil Avi­a­tion. How­ever, the year 2014 was a mixed bag of cheers and tears for lo­gis­tics sec­tor, though the year ended up on a de­cent note. De­spite the mi­nor glitch, the In­dian lo­gis­tics in­dus­try is look­ing for­ward to script another suc­cess story in 2015.

Prime Min­is­ter Modi has cre­ated a surge in the global in­ter­est in In­dia and re­vived the In­dian growth story. Thus, the in­dus­try can ex­pect 2015 to be a year of growth and new in­vest­ments that in turn will cre­ate new op­por­tu­ni­ties for the lo­gis­tics sec­tor. The ‘Make in In­dia’ cam­paign will see in­vest­ments would con­nect In­dia to global pro- duc­tion net­works and would gen­er­ate sig­nif­i­cant new business for lo­gis­tics in In­dia. This will make In­dia an at­trac­tive lo­ca­tion to do business as com­pared to oth­ers in the re­gion. How­ever, this pro­jected cam­paign can hap­pen only with the help of a sound and ef­fi­cient in­fra­struc­ture. Though In­dia is im­prov­ing on its in­fra­struc­ture de­spite the slug­gish eco­nomic growth in the last decade and emer­gence of large mid­dle class mar­ket with in­creas­ing pur­chas­ing power, few sec­tors in In­dia still need to catch up with rest of the world to keep pace with de­vel­op­ment tak­ing place in rest of the world. This will help in bring­ing down the costs to a con­sid­er­able ex­tent.

The in­creas­ing num­ber of ecom­merce set ups has con­trib­uted sig­nif­i­cantly to grow­ing de­mand for spe­cialised lo­gis­tics ser­vices which is a key support fac­tor for the business. On the other hand, in­dus­try is also look­ing for­ward to en­cour­age in­tel­lec­tual abil­i­ties in cargo and lo­gis­tics sec­tor. In­fra­struc­ture for ed­u­ca­tion, train­ing and re­search is needed to en­sure avail­abil­ity of tal­ented and skilled work force ca­pa­ble of func­tion­ing with ef­fi­ciency and bring in­no­va­tion in the sec­tor.

CARGOTALK talks to in­dus­try vet­er­ans to know their ex­pec­ta­tions and wish list for 2015.

Air cargo is ex­pected to grow sig­nif­i­cantly as the in­ter­na­tional air cargo will be pri­mar­ily driven by US and Euro­pean economies. And, th­ese economies are ex­pected to do fairly well with new mar­kets like China and Africa which has shown pos­i­tive signs of growth. In­dian econ­omy is also ex­pected to be on a growth tra­jec­tory with new Gov­ern­ment ini­tia­tives for con­ducive pol­icy en­vi­ron­ment and ini­tia­tives like ‘Make in In­dia’ shall boost the eco­nomic growth of the coun­try. This how­ever has to be sup­ported by ad­e­quate road in­fra­struc­ture to feed into the gate­way air­ports to bring out the real po­ten­tial.

The new sec­tor which is ex­pected to open up is In­ter­na­tional E-com­merce. How­ever, na­tion­ally E-com­merce has al­ready shown ex­ten­sive growth which is ex­pected to follow the same trend in FY16. Do­mes­tic air cargo sec­tor is also ex­pected to see more freighter move­ments. The IATA ini­tia­tive for air cargo sup­ply chain to go pa­per­less is also ex­pected to take new heights in In­dia with Delhi and Ban­ga­lore air­ports al­ready be­ing IATA E-freight com­pli­ant and more air­ports are ex­pected to follow the e-freight route.

Tran­ship­ment cargo will be the key driver for hub air­ports wherein In­dia gets ben­e­fited with its unique po­si­tion in Asia pa­cific re­gion and is ex­pected to grow sig­nif­i­cantly.

Per­ish­able com­mod­ity is another big op­por­tu­nity as In­dia leads in pro­duc­tion on most of this com­mod­ity but takes a back foot in ex­ports due to un­avail­abil­ity of re­quired in­fra­struc­ture to main­tain the end to end cold chain from pro­duc­tion to air­ports.

2014 was not the best year for the in­dus­try as we did not see growth in im­ports & ex­ports. How­ever, there are some signs of re­vival, hope­fully growth to follow in the year 2015.

How­ever, a suc­cess­ful ‘Make in In­dia’ ini­tia­tive will give much needed im­pe­tus to the man­u­fac­tur­ing sec­tor and this lead to growth in both ex­ports and im­ports by the man­u­fac­tur­ing sec­tor. The fac­tor that will fa­cil­i­tate the ef­fec­tive func­tion­ing of lo­gis­tics in­dus­try is In­fra­struc­ture only, which in­cludes phys­i­cal in­fra­struc­ture, in­fra­struc­ture for ed­u­ca­tion, re­search and train­ing and reg­u­la­tory in­fra­struc­ture.

The great­est chal­lenges of the lo­gis­tics sec­tor par­tic­u­larly in­ter­na­tional lo­gis­tics sec­tor are thin­ning of mar­gins due to com­modi­ti­sa­tion and un­dif­fer­en­ti­ated ser­vices cou­pled with over de­layed pay­ments by the cus­tomers.

The in­creas­ing costs and signs of global slow re­cov­ery re­sult­ing lower yields have put a pres­sure on the bot­tom line of the in­dus­try. Even though there are signs of growth. We ex­pect the cur­rent trend of growth in air cargo to con­tinue un­in­ter­rupted. Clean reg­u­la­tory en­vi­ron­ment will bring global stan­dards of ac­count­abil­ity for all stake­hold­ers in­clud­ing gov­ern­ment agen­cies for ef­fi­ciency.

Air cargo needs a makeover and that can hap­pen only if all the air­port stake­hold­ers along with reg­u­la­tors strengthen their col­lab­o­ra­tion to be­come more ef­fec­tive and faster. The air freight in­dus­try has come a long way from the past. The growth in the in­dus­try was driven by tech­no­log­i­cal ad­vance­ment, in­fra­struc­ture de­vel­op­ment, ef­fec­tive com­mer­cial mod­els for air­ports, growth in 3pl & 4pl lo­gis­tics, cold chain and ware­hous­ing seg­ments and drive for eCom­merce and e-Freight. En­gi­neer­ing goods, Elec­tron­ics, Phar­ma­ceu­ti­cals and e-Com­merce will be the ma­jor business driv­ers.

The sec­tor is see­ing growth after some chal­leng­ing years and the fu­ture could be promis­ing for the in­dus­try. Look­ing ahead to 2015, more ac­cess to Tier II and Tier III ci­ties can be seen with more fleet or­ders and strate­gic part­ner­ships. I would like to see some sort of flex­i­bil­ity in avi­a­tion tax struc­tures. There could be more in­ter­na­tional air­lines and LCCs op­er­at­ing to/from the In­dian skies through strate­gic bi­lat­eral agree­ments and FDIs in In­dian car­ri­ers thus en­hanc­ing the ca­pac­ity of pas­sen­ger seats and cargo belly space. In­dus­try is op­ti­mistic that the new gov­ern­ment will up­grade the air cargo sec­tor. We look for­ward to see the gov­ern­ment bring out the right poli­cies to support the air cargo in­dus­try. The gov­ern­ment needs to put in more ef­forts to iden­tify the chal­lenges, ex­am­ine the pro­ce­dures to im­prove ef­fi­ciency of air cargo lo­gis­tics.

2014 was not a spec­tac­u­lar year. The big in­fra­struc­ture push in In­dia will spur pro­duc­tion and ex­ports. How­ever a steady and mod­er­ate oil prices will im­prove the bot­tom lines of car­ri­ers. Process sim­pli­fi­ca­tion needs to be ad­dressed im­me­di­ately to re­duce the trans­ac­tion cost and hu­man in­ter­face be­tween the reg­u­la­tor and common man needs to be re­placed with tech­nol­ogy so that we would be able to achieve a time def­i­nite pro­cess­ing win­dows.

2014 saw a tremen­dous surge in on­line re­tail. The big game changer will un­doubt­edly be the im­ple­men­ta­tion of GST, which will make small frag­mented ware­houses in­ef­fi­cient. Lack of trained man­power and trans­porta­tion, along with in­fra­struc­ture will con­tinue to pose a chal­lenge in 2015. In­fra­struc­ture de­vel­op­ment, which in­cludes roads, rail­ways, and im­proved qual­ity of ware­houses, will go a long way in sup­port­ing the in­dus­try. Also, ac­cel­er­a­tion of projects like the Delhi – Mumbai In­dus­trial Cor­ri­dor (DMIC) will cre­ate ef­fi­ciency in the lo­gis­tics sec­tor.

New gov­ern­ment has bought support to all the miss­ing com­po­nents; ei­ther we talk about en­tail­ers or mod­ern pack houses. The gov­ern­ment has al­lo­cated Rs 5000 crore fund for cold chain seg­ment and another Rs 2000 crore for food pro­cess­ing. Sub­sidy support of 35-50 per cent has been given for in­fra­struc­ture set up.

If some­thing is miss­ing then it is in­dus­try lead­er­ship only. Our in­dus­try does not have a lead­er­ship. They wait for gov­ern­ment pol­icy to drape them. In­dus­try has to take lead­er­ship, see the ad­van­tage of be­ing in the food dis­tri­bu­tion business.

Gov­ern­ment pol­icy is al­ready there to support; we have laid the ground for you now run faster.

Vikas Anand MD DHL Sup­ply Chain In­dia

Pawanexh Kohli Chief Ad­vi­sor NCCD

Cyrus Kat­gara Part­ner Jeena & Company

Shan­tanu Bhad­kamkar Im­me­di­ate Past Chair­man, FFFAI

Manoj Singh Vice Pres­i­dent MIAL

Pradeep Pan­icker Pres­i­dent ACFI

Pradeep Pan­icker

Pres­i­dent, ACFI

Manoj Singh

Vice Pres­i­dent, MIAL

Pawanexh Kohli

Chief Ad­vi­sor, NCCD

Cyrus Kat­gara

Part­ner, Jeena & Company

Shan­tanu Bhad­kamkar

Im­me­di­ate Past Chair­man, FFFAI

J Krishnan

Man­ag­ing Part­ner, S. Natesa Iyer & Co.

Vikas Anand

Man­ag­ing Di­rec­tor, DHL Sup­ply Chain In­dia

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