Logistics sector gets infrastructure status
An infrastructure status to the logistics sector will enable the industry to access cheaper finances to develop industrial parks, cold chains and warehouses
New Delhi: In a major push to developing an integrated logistics framework in the country including industrial parks, cold chains and warehousing facilities—the government has granted infrastructure status to the logistics sector, enabling the industry to access cheaper finances.
To adopt a coherent approach for the development of logistics infrastructure, the government appointed former director general of Directorate General of Supplies and Disposals (DGS&D) Binoy Kumar as special secretary in charge of logistics in the commerce and industry ministry earlier this month.
Considering a proposal by the commerce ministry, the finance ministry, in a meeting held on 10 November, decided to include logistics in the master list of infrastructure sub-sectors, according to a finance ministry statement.
The government has defined “logistics infrastructure” to include a multimodal logistics Park comprising an Inland Container Depot (ICD) with a minimum investment of Rs50 crore and minimum area of 10 acre, a cold chain facility with a minimum investment of Rs15 crore and minimum area of 20,000 sq. ft and a warehousing facility with a minimum investment of Rs25 crore and a minimum area of 100,000 sq ft.
Development of logistics will give a boost to both domestic and export markets, the finance ministry said in a statement. “The need for integrated logistics sector development has been felt for quite some time, in view of the fact that the logistics cost in India is very high compared to developed countries. High logistics cost reduces the competitiveness of Indian goods both in domestic as well as export market,” the statement said.
The decision will enable the logistics sector to access infrastructure lending at easier terms with enhanced limits, larger amounts of funds as external commercial borrowings (ECB), longer tenor funds from insurance companies and pension funds and also make it eligible to borrow from the India Infrastructure Financing Co. Ltd (IIFCL).
According to a study conducted by the government on Assessment of Quantitative Harvest and Post-Harvest Losses of Major Crops and Commodities in India, the annual value of harvest and post-harvest losses of major agricultural produces at the national level was of the order of Rs92,651 crore calculated using production data of 2012-13 at 2014 wholesale prices. Infrastructure status for cold chains and warehousing facilities will provide a big boost to attracting private investment in this sector.
In 2017, India’s logistics performance improved from 54 to 35 under World Bank Logistics Performance Index (LPI). The government expects the Indian logistics sector to grow to $360 billion by 2032 from the current $115 billion.
The road ministry plans to develop around 35 multimodal logistics parks in India that would cater to 50% of the freight movement, enable a 10% reduction in transportation costs and a 12% reduction in carbon dioxide emissions. Of these, pre-feasibility studies for six locations have already been initiated.
Deepal Shah, chief executive of Avvashya CCI Logistics Pvt. Ltd, said the government’s decision to accord infrastructure status will boost competitiveness that will transform logistics into a sunshine industry. “This will lead to better access to funds and consequent rise in investments for industrial parks, warehouses and transportation, (thus) providing a major fillip to consumption,” Shah added.
Jagannarayan Padmanabhan, director and practice lead (transport and logistics) at Crisil Infra advisory, said that at a time when the government is focusing on programmes like Bharatmala to improve overall logistics performance and development of multimodal logistic parks, the move will drive growth. “I feel it will draw further investment and make (the) sector attractive,” he added.