Industry chamber heads, government officials and infrastructure and logistics experts have begun confabulating about their expectations from Union Budget 2023-24. Emphasis is being laid on adopting 100% digitalization, improving logistics infrastructure and training manpower.
Ritika Arora Bhola
The Union Budget 2023-24 should address various constraints such as increasing air freight rates, input costs of fuel, Goods and Services Tax (GST) on export freight and |other major challenges making operations costlier.
Experts are also anticipating implementation of the recently launched National Logistics Policy, expected to bring down the cost of logistics from 14 per cent to single digits.
Experts are also anticipating implementation of the recently launched the National Logistics Policy, which is expected to bring down the cost of Gross Domestic Product from 14 per cent to single digits.
There has also been discussion about investing in making this sector carbon-neutral by using less carbon-emitting fuels, electric scooters, and other similar technologies, this should have space in the upcoming Union Budget. A clarity on investments in port infrastructure to alleviate logistics inefficiencies, should be given. There should be an incentive-based system where people building warehouses are rewarded, and the tenant gets a place at much cheaper rate per square feet. The government should also consider investing heavily in automation and incentivizing warehouses that integrate these technologies, highlighted experts.
On the banking front, interest rates are high. The interest rate on Capex investment must be decreased. Logistics is a manpower-intensive industry, and while the Skill Council is trying to upgrade the skillset of human resources, we also need training institutes to train them in the latest technologies and promote Research and Development (R&D) and innovation, the vexperts added.
As per the ICRA report, “The logistics industry is expected to grow at a rate of 9 per cent per annum. The New Year will bring in more growth for this industry, especially with the help of budgetary provisions for the same. Digital technology will witness a massive push thanks to a 1,500 crore scheme on digital payment, streamlining the consumer interface for many logistics companies in India.” Besides this, the investment in connectivity via the national highways planned to be built in Tamil Nadu, Assam, Kerala, and West Bengal will move at full speed ahead. This increased road infrastructure will augment logistics optimization and help with strategic warehousing as well, they added.
Some specialised incentives for women entrepreneurs, especially from rural areas, would be instrumental in bringing the much-needed gender parity in the Union Budget.
The budget is also expected to build upon the work outlined in the earlier year with a focus on multimodal connectivity and improving physical infrastructure. “We could expect to see more allocation for the national highway network, towards rail infrastructure in an expansion of tracks as well as container capacity, development of cargo terminals and warehousing capacity which will further strengthen the groundwork for an integrated logistics system. We would also expect the government to continue to build on the UDAN scheme with new airports for enhanced regional connectivity and increased capacity at existing airports. We are certain that the government’s strategic moves will continue to develop the logistics sector and improve India’s supply chain competitiveness,” said the experts.
The industry is quite positive about the sector’s long-term growth in the coming years and with government’s support in the form of various schemes such as PM Gati Shakti, Self-Reliant India, ‘Make in India’ and Udaan among others, the industry is keeping the expectations high, keeping aside mounting apprehensions regarding geopolitical headwinds emanating from several circumstances such as global economic recession and supply chain disruptions due to increasing COVID cases in China.
CARGOTALK spoke to professionals to find out their expectations from the upcoming Union Budget 2023-24.
Reduce fuel, electricity, steel, cement, labour costs
Sunil Nair, CEO, Snowman Logistics
In 2023, the logistics industry will go through restructuring of the distribution network that will drive a lot of changes, both for big and small organizations, majorly driven by the National Logistics Policy. The rising input costs of fuel, electricity, steel, cement, labour are major challenges for the sector, thereby making operations costlier. This needs to be fixed otherwise cold chain companies will be impacted the most. The year is expected to bring in technology upgrades to make things efficient in the long-term.
Launch initiatives to make logistics sector carbon-neutral
Zaiba Sarang, Co-founder, iThink Logistics
Logistics is one of the most competent industries in the world, to the point where it is regarded as the foundation upon which all other businesses are built. As a result, when discussing budget allocation, we must recognise how critical it is to not only invest in this sector, but also to ensure that our investments are directed toward areas that truly matter. Logistics is one of the unorganized industries, so we should anticipate investments in activities that will make it more organized. PM Gati Shakti National Masterplan, for example, has focused on seamless multimodal connectivity to enable smooth operations. We can anticipate the implementation of the National Logistics Policy, which will bring down the logistics cost as proportion of GDP from 14 per cent to single digits. There has also been discussion about investing in making this sector carbon-neutral by using less carbon-emitting fuels, electric scooters, and other similar technologies. We can expect 2 lakh crore in investments in port infra to alleviate logistics inefficiencies. We can forecast that 2023 will be the year when the logistics industry reaches its full potential.
Union Budget should focus on reducing logistics costs
Dhruv Agrawal, COO and Co-founder, Shipsy
The logistics and supply chain industry has long been challenged by the sector’s highly fragmented nature, multiple regulatory bodies, manual approval processes, lack of stakeholder collaboration, growing cost leakages and rising logistics cost among others. The National Logistics Policy has been a step forward in mobilizing the power of digital transformation. The upcoming Union Budget would most likely move it forward by strengthening its foundation for its seamless implementation and reducing logistics cost. Besides, there is an urgent need to address climate change concerns through regulations. It would be excellent if the government allocates funds to develop policies ensuring sustainable logistics practices through digitization. The last-mile emissions per delivery in India are 285 gm CO2, higher than the global average of 204g CO2. Businesses can reduce their carbon footprint by digitizing core operations. This can be accomplished by shrinking the miles travelled per package and ensuring the distance is covered using greener delivery modes. The thrust to expedite the development of multimodal logistics parks will be welcomed by the logistics industry, as it will facilitate lowering logistics cost and emissions. Emphasis on closing the digital skill gap in the logistics sector also will be beneficial.
Move to bring gender diversity in workforce
Deepak Tiwari, COO, KSH Logistics
In 2023, the Centre should address issues such as rising rental prices, fuel prices, and infra cost; they have increased the operational cost for any logistics company. There should be an incentive-based system where people building warehouses are rewarded, and the tenant gets the place at a much cheaper rate per sq. ft. The government should consider investing heavily in automation and incentivizing warehouses that integrate these technologies. On the banking front, interest rates are high. The interest rate on Capex investment must be decreased. Logistics is a manpower-intensive industry, and while the Skill Council is trying to upgrade the skillsets of human resources, we need training institutes to train them in the latest technologies and promote R&D and innovation. We need to bring diversity in workforce and create equal opportunities for women and transgenders. Lastly, if the infra development the government is doing in tier II and III cities gets expedited, then we get a
better landscape to work. Today the metros are saturated. It is time to focus and
build the rest of India.
Budget must focus on infrastructure development
Vineet Agarwal, MD, TCI
We expect the forthcoming budget to provide a balance between the economic growth priorities and inflation concerns. The momentum of growth at which India has come up after COVID cases reduced cannot be weakened. We believe the budget will be structured to sustain the growth momentum and will continue infra development, irrespective of the ups and downs. As the government’s vision to ease supply chain bottlenecks is evident in the scale of decisions and initiatives undertaken in the recent past. The focus on execution of certain strategies will improve global competitiveness. Reducing logistics cost and creating a tech-enabled structure will help achieve the target of positioning India among top 25 countries in the Logistics Performance Index. In addition, emphasis on upskilling programs such as Gati Shakti Vishwavidyalaya will help the logistics sector contribute its best in India leading the Industrial Revolution 4.0 and 5G era.”
Digital technology will witness a massive push in 2023
Rahul Mehra, Co-founder, Roadcast Technologies
There has been a major interest in helping the logistics sector in India grow. As per a report by Investment Information and Credit Rating Agency of India Limited (ICRA Ltd), the logistics sector industry is likely to grow at 9 per cent per annum. 2023 will bring in more growth for this industry, especially with the help of provisions in the budget for the same. Digital technology will witness a massive push of as much as 1,500 crore scheme on digital payment introduced to streamline the consumer interface for many logistics companies in India. Besides this, the new scheme will support merchant Indian ships and will also enhance commerce. The investment in increasing green energy and working towards zero-carbon environment will augment the electronic vehicles (EVs) sector and ultimately logistics connectivity.
Budget should allot investment for transportation sector
Ratheesh D, Director CABT Logistics
The logistics sector is one of the key sectors that is supporting the economy and it has witnessed immense growth in the past few years. Going forward, in the budget, there should be a major push for infrastructure spending and development that will help the logistics sector grow further. The budget will allot substantial investment towards the transportation sector with provisions of more than 2 lakh crore. Besides this, the investment in connectivity via the national highways planned to be constructed in Tamil Nadu, Assam, Kerala, and West Bengal will also move full speed ahead. This increased road infrastructure will augment logistics optimisation and help with strategic warehousing as well.
Budget likely to boost e-commerce logistics sector
Nisschal Jain, Co-founder and CEO, Shypmax
With the upcoming budget, the Indian e-commerce logistics sector is expecting some clarity on the de-minimis (threshold) value. Currently the de-minimise value for India, for e-commerce import is 0, which means that all orders into India, regardless of value, will often incur GST on their shipments. Items imported into the USA are subject to duty when the value is over US$800. In Australia, duty and taxes begin after the first US$1,000. In Canada, it is US$20; in some other nations, it is US$5. It is evident that individuals will buy more if duties are exempted or reduced. The 2022-23 budget had introduced a simplified regulatory framework to facilitate export of jewellery through e-commerce. It was limited only through Express Cargo Clearance System at ICT Mumbai, ICT Delhi, and ICT Jaipur, as per Central Board of Indirect Taxes and Customs (CBIC) SoPs. Stakeholders awaited details on the same during the upcoming budget. The limit of exports worth 5 lakhs via courier under CSB-V, which affects the fine jewellery’s export, is counterproductive and confuses e-logistics players as well as exporters.
Technology imperative for logistics, air cargo
Parvinder Singh, Managing Director, Hans Infomatic
We are the technology solutions provider for the logistics industry. After the announcement of new National Logistics Policy, the expectations are more from the government to uplift this sector. The sector needs the right set of incentives and support measures to accelerate its recovery, as without proper assistance the sector, which keeps trade and commerce moving, could get choked. We still find many small and medium organisations from this sector, hesitating to invest on technology front. It has been observed that these organisations need to be coaxed to adopt technology. Indian customs have done a lot for digitization, still many areas are left, which can be digitalized and at the same time, can be mandated so that the industry users must adopt the digitized processes. The government can also financially support and motivate these companies towards digitalization, which will boost the logistics industry. So, more measures are expected to make this industry move towards ‘completely paperless’, which in turn will lead to more efficiency and cost-effectiveness to compete globally.
Improve infrastructure to help MSMEs, large exporters
Sanjay Bhatia, Co-founder & CEO, Freightwalla
Focus on holistic infrastructure creation would help the MSMEs and large exporters. Apart from infra, attention must also be paid to digitization of the supply chain system for smooth functioning and lowering the logistics cost that benefits the MSME exporters. Some incentives for women entrepreneurs from rural areas should be given to bring about gender parity. A budget allotment towards digitization will be a catalyst for the EXIM fraternity. Emphasis on container manufacturing, budget allocation for strengthening inland waterways and boosting multimodal connectivity will help bolster exports. Broadening the scope of the PLI scheme by incentivising other segments such as apparel, and heavy machinery would help boost India’s exports. There are 6.3 crore MSMEs. Apart being the being the economy’s backbone, they generate 11 crore jobs and contribute to 30 per cent of India’s total exports. Despite such a robust presence, most MSMEs face multiple challenges in their daily life. A seamless supply of working capital is one of them, due to which production growth is hindered, and the balance sheet is affected. Efforts towards creating a long-term solution to address working capital needs at a subsidised rate for rural and semi-urban micro and small enterprises will help them get in the export race with larger counterparts.
Develop cargo terminals and warehousing capacity
Yogesh Dhingra, Founder, MD and CEO, Smartr Logistics
In line with the NLP and the PMGS, reducing logistics costs in India from 14 per cent to under 10 per cent of GDP is a priority. The budget is expected to build upon the work outlined in the prior year with a focus on multimodal connectivity and improving physical infra. We could expect to see more allocation for the NH network, towards rail infrastructure in an expansion of tracks as well as container capacity, development of cargo terminals and warehousing capacity, which will strengthen the groundwork for an integrated logistics system. We would expect the government to continue to build on the UDAN scheme with new airports for enhanced regional connectivity and increased capacity at existing airports. We are certain the government’s strategic moves will continue to develop the logistics sector and improve India’s supply chain competitiveness.
Investment in digital R&D for supply chain is critical
Nitish Rai, CEO and Co-Founder, FreightFox
Sub-par transportation infra and poor visibility are the country’s biggest problems, and the government has taken steps in the right direction towards improving it:
- Greater push towards completion of DFCs and expressways will help increase utilisation of resources and improve speed of goods movement
- Inclusion of fleet owners under the GST, would help them save up to 10 per cent of their costs incurred towards new fleet, and tyres among others
- Bringing diesel under the purview of GST has been mulled over, but this step can further lower to 7-8 per cent for fleet owners
- We also expect more support for our transporters on the road, especially in the form of affordable board and lodging
- Investment in digital R&D for the supply chain is critical, especially in an era of hyper-competition and significant opacities along the way
In the current economic climate, supply chain efficiency is vital to ensure that India’s economy stays robust. Making that a reality requires government support, and we are confident the Union Budget 2023-24 will reflect that.
