In­fras­truc­ture to pro­pel growth

Out of the ` 2.21 lakh crore al­lo­cated for in­fras­truc­ture de­vel­op­ment in bud­get 2016-17, the al­lo­ca­tion for road and rail de­vel­op­ment is ` 2.18 lakh crore. In­dus­try ex­perts share how this in­vest­ment will help the sec­tor.

Cargo Talk - - Front Page - KAL­PANA LOHUMI

With a fo­cus on in­fras­truc­ture de­vel­op­ment, the Union Bud­get 2016-17 an­nounced the al­lo­ca­tion of ` 2.18 lakh crore for rail and road sec­tor. Though neu­tral in the short run for the lo­gis­tics sec­tor, it is ex­pected to have a pos­i­tive ef­fect in the long run. Fur­ther, the move to al­lo­cate

` 55,000 crore for road and high­ways shall ad­dress last mile con­nec­tiv­ity is­sues and help in re­duc­ing lo­gis­tics cost of ex­port goods which move by roads.

The govern­ment also plans to im­prove 50,000 km of state high­ways to na­tional high­ways and plans on build­ing 10,000 km of new roads at a speed of 100 km per day. If this is achieved, it would help to bring truck­ing costs down. Hence, im­proved fuel ef­fi­ciency and re­duced main­te­nance cost for truck­ing com­pa­nies would re­duce prices for long-haul trans­porta­tion.

An­other an­nounce­ment of de­ferred cus­toms duty pay­ment for large im­porters would make im­porters plan lo­gis­tics ef­fi­ciently, po­ten­tially in­creas­ing num­ber of ship­ments.

Most in­dus­try vet­er­ans opine that the in­vest­ment will not only kick­start the eco­nomic growth but have a mul­ti­plier ef­fect on the country’s econ­omy. But there was no an­nounce­ment for the air cargo seg­ment ex­cept de­vel­op­ment of 160 non-func­tional air­ports across the country at a cost of 50-100 crore each. Mov­ing cargo by air needs limited fly­ing time but mov­ing it in­side is a chal­lenge. How­ever, per­ti­nent ques­tions are: Will this in­vest­ment help to move the cargo smoothly and speed­ily? Will the cost of trans­porta­tion get re­duced with new high­ways? Will this bring the country’s lo­gis­tics sec­tor at par with in­ter­na­tional stan­dards? Ex­perts share their views:

Along with in­vest­ment in in­fras­truc­ture, other fac­tors such as track and trace have to im­prove too Bet­ter road in­fras­truc­ture cou­pled with GST will re­duce the time for tran­sit and cross-bor­der hold-ups ` 19,000 crore has been al­lo­cated for Prad­han Mantri-Gramin-Sadak Yo­jana. Work on Na­tional Wa­ter­ways is ex­pe­dited Bet­ter roads will bring down truck­ing costs, im­prove fuel ef­fi­ciency and re­duce main­te­nance costs

Shan­tanu Bhad­kamkar, Man­ag­ing Di­rec­tor, ATC Clear­ing

In­fras­truc­ture de­vel­op­ment will help growth only to a limited ex­tent. The real growth, how­ever, will come due to the force mul­ti­plier ef­fect. Good in­fras­truc­ture will en­able re­li­able and ef­fi­cient lo­gis­tics which in turn will im­prove man­u­fac­tur­ing ef­fi­ciency and catal­yse eco­nomic growth. This in­vest­ment is a much awaited in­vest­ment, as ev­ery­one had great ex­pec­ta­tions af­ter the then Plan­ning Com­mis­sion’s an­nounce­ment of $ 1 tril­lion in­vest­ment in in­fras­truc­ture for the lo­gis­tics sec­tor dur­ing the 12th five year plan (2012-2017).

It is pre­ma­ture to ar­rive at quan­ti­fied es­ti­mate of cost re­duc­tion. It will de­pend on where the money is in­vested and how the cap­i­tal is em­ployed. The only in­ter­na­tion­ally recog­nised stan­dard as a mea­sure for lo­gis­tics sec­tor is the Lo­gis­tics Per­for­mance In­dex (LPI) of the World Bank.

Rajesh Nee­lakanta, ED & CEO, BVC Lo­gis­tics

With im­prove­ment of road and rail in­fras­truc­ture, the im­me­di­ate ben­e­fit would be the low­er­ing of op­er­at­ing costs for road trans­porta­tion which will go a long way in re­duc­ing the high lev­els of over­all lo­gis­tics costs in In­dia. Se­condly, bet­ter road in­fras­truc­ture cou­pled with the roll­out of GST, will re­duce the time for tran­sit and cross­bor­der hold-ups, thus be­com­ing more en­vi­ron­men­tally sup­port­ive. A mat­ter of slight dis­ap­point­ment though, for the rail sec­tor, is the con­tin­ued govern­ment mo­nop­oly on freight by rail. We be­lieve we missed a chance to help the pri­vate freight train op­er­a­tors grow. They have ac­tu­ally in­vested heav­ily over the past few years. We’re sure that the Govern­ment will, over time, will take cog­nizance of this and make it an in­clu­sive en­gage­ment.

Prakash Tul­siani, Ex­ec­u­tive Di­rec­tor & COO, All­cargo Lo­gis­tics

Road and rail re­main the two modes of lo­gis­tics or trans­porta­tion used by In­dia to move do­mes­tic cargo. Any in­vest­ment in th­ese sec­tors is pro­duc­tive to en­hance the lo­gis­tics ca­pa­bil­i­ties of the country be­fore GST would get im­ple­mented to have world class lo­gis­tics net­work in place. Th­ese in­vest­ments will not only kick start the eco­nomic growth but would also re­sult in hav­ing a mul­ti­plier ef­fect on In­dia’s econ­omy, ul­ti­mately im­prov­ing de­mand for the lo­gis­tics in­dus­try. It will not only en­hance pro­duc­tiv­ity but cre­ate bet­ter con­nec­tiv­ity. The al­lo­ca­tion of funds in in­fras­truc­ture is thus likely to pro­pel the trans­port, ware­hous­ing and lo­gis­tics busi­nesses rapidly

over the medium term. The cost will go down as we will be able to han­dle more cargo and that too much faster. Bet­ter roads would help bring down truck­ing costs sig­nif­i­cantly. Im­proved fuel ef­fi­ciency and re­duced main­te­nance cost for truck­ing com­pa­nies would re­duce prices for long dis­tance trans­porta­tion. Hence, it will be pre­ma­ture to put a num­ber on over­all re­duc­tion in costs.

The in­vest­ment will im­prove the sta­tus of lo­gis­tics sec­tors and help it bring closer to in­ter­na­tional stan­dards. We are one of the fastest grow­ing coun­tries in the world. So we will need con­tin­u­ous in­vest­ments in lo­gis­tics in­fras­truc­ture to be at par with in­ter­na­tional stan­dards.

Ajay Khosla, DGM, Jaipur Golden Trans­port

Out of the al­lo­ca­tion of ` 2.21 lakh crore for in­fras­truc­tural de­vel­op­ment, to­tal cap­i­tal ex­pen­di­ture on rail and road de­vel­op­ment is ` 2.18 lakh crore, 85 per cent of this will be spend on the 70 stalled road projects to put on track and ne­ces­si­tated to the tune of ` 1 lakh crore in­volv­ing 8,300 km. There is plan to build a 10,000 km of build­ing new roads at ex­pected speed of 100 km per day.

Al­lo­ca­tion for high­ways and roads de­vel­op­ment at ` 55,000 crore while NHAI can raise tax free bonds of ` 15,000 crore and the to­tal al­lo­ca­tion for road sec­tor

` 97,000 crore in­clud­ing ru­ral roads. ` 19,000 crore has been al­lo­cated for Prad­han Mantri Gramin Sadak Yo­jana. Work on the Na­tional Wa­ter­ways also be­ing ex­pe­dited and ` 800 crore has been pro­vided for com­ple­tion of th­ese tasks. ` 11,635 crore were an­nounced to ripen the ini­tial phase of har­bour projects in Tu­ti­corin and de­vel­op­ment of SEZs in JNPT and Kandla to rise up ship­ping in­fras­truc­ture. Also pro­posed in­vest­ment of 5,000 crore for ware­hous­ing and in cold chain ver­ti­cal, ba­sic cus­tom and ex­cise duty on re­frig­er­ated con­tain­ers is de­duce in range of five and six per cent re­spec­tively.

En­hance­ment of re­gional air traf­fic, Fi­nance Min­is­ter also an­nounced de­vel­op­ment of 160 non-func­tional air­ports on pan In­dia level. Th­ese air­ports and air strips re­vived at cost of ` 50-100 crore each lo­ca­tion in co­op­er­a­tion with state govern­ments.

Road and rail re­main the two modes of lo­gis­tics or trans­porta­tion used by In­dia to move do­mes­tic cargo. Any in­vest­ment in th­ese sec­tors is pro­duc­tive to en­hance lo­gis­tics

Lo­gis­tics in­dus­try wel­comes th­ese an­nounce­ments–bet­ter and more road in­fras­tur­cc­ture will not re­duce op­er­a­tional and main­te­nance cost but also en­hance the fuel ef­fi­ciency and speed of trucks.

Shan­tanu Bhad­kamkar Man­ag­ing Di­rec­tor ATC Clear­ing

Rajesh Nee­lakanta ED & CEO BVC Lo­gis­tics

Ajay Khosla DGM Jaipur Golden Trans­port

Prakash Tul­siani Ex­ec­u­tive Di­rec­tor & COO All­cargo Lo­gis­tics

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