Union Budget 2017 & Logistics Industry

Union Budget 2017

Union Budget of 2017 marks starts of the new era for Rural development and Logistics. A lot of new initiatives has been taken and new projects were announced which might help in streamlining and making logistics more efficient. Currently, India spends 14 % of its GDP on logistics which is much more compared to developed countries i.e. 8 %.With booming e-Commerce Industry, Indian Logistics market is expected to reach $307 bn by 2020 and there are ample opportunities for everyone in the industry. Below are the focus points of Union budget and are related to logistics Industry.

Infrastructure:-24 lacs crore has been allocated to Transportation Industry of which 1 lac crore will go to Railways for infrastructure improvement and 64,000 crores for building Highways.

Digital Payment on Toll booths: - Association with multiple partners like ICICI, Paytm to make toll payments faster and smooth. FASTag (https://en.wikipedia.org/wiki/FASTag) will enable faster movement of traffic on tolls decreasing waiting period, reducing diesel loss & also reducing cash handling charges.

Reduction of service taxes for Haulage services on Railways from 14 to 4.2 %.

Association of railways and e-Commerce: - Multiple warehouses across various station offers great opportunities to E-commerce industry for faster delivery of products. These warehouses can be used directly by e-commerce companies or FCS to support the industry. As these locations will be inside the city and will be available at much lower real estate cost.

Development of Industrial Corridors: - Purpose of these Industrial corridors are to upgrade existing Industrial clusters, Establishing export-oriented manufacturing zones, development of dedicated freight corridors. These Corridors will provide an opportunity to local players along the stretch with Employment opportunities.Removal of dark/Blind spots along these corridors will reduce accidents also and thus reducing another cost.

DMIC- Delhi Mumbai Industrial Corridor

AKIC- Amritsar-Kolkata Industrial corridor

CBIC- Chennai-Bangalore Industrial Corridor

VCIC- Visakhapatnam Chennai Industrial Corridor

BMEC – Bangalore-Mumbai Industrial Corridor

Sagarmala project: - A government strategic initiative with the focus on modernizing ports and coastal areas. 6 mega ports are proposed to be developed under this project. This will decrease loads on existing mega ports and can help in faster delivery to end customers. As per Finance ministry –"The project includes modernization of our ports and islands, setting up of coastal economic zones, new major ports, and fish harbors. We expect that the total investment in the project would be to the tune of ₹700 billion (US$10 billion)."

Inland waterways transportation: - This is targeted to empower villages across the belt of perennial rivers like Ganga, Yamuna, etc. The main focus would be to move perishable items from farm to end customer’s train station.

Way Forward- Opportunities

Development of RFID/ GPS :-enabled trucks will help in fast pinpoint tracking of parcels along the route or inside warehouse /Fulfilment centers. This will empower seller to determine an approx time of delivering and make their customer happy.

Port Infrastructure: - Dredging the ocean belt and other infrastructural improvement will help in harboring mother vessels.  Mother vessels provide good opportunities in terms of more container berthing in less period and also helps in sending more export containers simultaneously. In addition to that, it will generate additional revenue for Port trust.

Technological improvements in Railways: - Extensive railway network and clearing some bottlenecks will decrease TAT period for product deliveries. Factories will get required resources in time. Railway car carriers help in transporting ready cars from Chennai / Haryana to end customers in North or South India faster. This will decrease over dependency on Road transport and will save freight cost also. Levitation techniques like Maglev will increase the speed of trains. Trains in India generally travel in the range of 70- 90 kmph and this Maglev can increase their speed to minimum 140- 190 kmph thus reducing travel time. These techniques also reduce chances of accidents.    

Renewables: - Railway is currently exploring opportunities of renewable to reduce over dependency of thermal power and thus targeting to reduce Electric expenses.  Rooftop areas of Railway stations can be utilized for generating enough power which can sustain requirements of that station.

Focus on Northeast & JK:- Unlike old governments, Union budget of 2017 is trying to empower people from areas of Northeast states and J& K. Chennai –Nashari Tunnel (9 + km) has been constructed at the cost of USD $ 550 Million. This will reduce time and distance to reach Kashmir which becomes isolated from rest of India for 4-6 months of the year. Multiple projects worth 10,000 crores have been announced for infrastructure and logistics improvement in these states.

Logistics start-ups:-Startups like eCourierz.com are trying to consolidate logistics and IT solutions to provide best solutions to MNCs and other e-commerce companies. Many more are trying to add value by investing and improving existing infrastructure. More support and clear taxation policy will help in creating more value oriented innovations.

“Future of logistics Industry is definitely bright but definitely out of sight for many who are looking to disrupt market without adding value for themselves or for others” – Shashi Shekhar Tripathi, CMO eCourierz.com.