Published On: Thu, Jul 20th, 2017

Benefits from GST for Logistics Sector

Brijesh Lohia, MD, Global Ocean Group

India being bound by sea on three sides and has a 7,516.6 kms coastline, making it the seventh largest in the world. Therefore, it is evident that Indian ports handle 90% of the Exim trade volume. The railways contribute 9% to the GDP; the road sector contributes 6%, whereas the ports’ share of GDP is only 1%. This questions the vast potential for development of coastal cities and ports.

To throw more emphasis on port logistics, Modi government has decided to pursue Sagarmala project.  Under this, 12 smart cities will be developed near ports with an investment of Rs 50,000 crore.

Briefing on Sagarmala project as a crucial infrastructure initiative to up India’s GDP  by  2%,  “This project will boost  economic  activity  near  coastal  locations  and  establish Coastal Economic  Zones (CEZs). Kandla Port has been identified as a potential CEZ. The project will redevelop existing port infrastructure through upgrade in port handling equipment and extensive use of IT in improving monitoring and operations of port activity. Jawaharlal Nehru Port Trust (JNPT) will be one of the ports to receive Rs 4,000 crore to develop its SEZ.”

The project is expected to enhance shipping and port handling capacity. Specialised ports with focus on handling coal, energy, chemicals, commodities, etc.

India suffers from poor port linkages from existing port infrastructure and lack of developed infrastructure near ports.  Along with  this,  an inefficient  inter-modal  transport  connectivity  results  in high cost of logistics  and  exports.  With this project, development and linking of short-sea  shipping,  coastal  shipping and inland waterways transportation will  get  the  due  attention.  Further development of ship building, ship repair and ship recycling industry will also be a priority. Enhanced development of offshore drilling and storage platforms is another objective of the project. It also aims at developing logistics parks and warehousing near coastal locations to support port activity.  “India offers great potential for developing offshore  renewable  energy  and government has accorded  due  priority  to  attract  investment  in  this  area. The power generated will feed the coastal activity and also contribute to the national grid,” Lohia concluded.

Explaining on reduced logistics cost due to GST, “It will help companies reduce logistics cost by 1.5 to 2.5% as they will reconfigure their supply chains. There will adoption of hub-and-spoke model, fewer but large warehouses and eliminating check post delays to gain savings of 0.4-0.8% of sales.”

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