The logistics sector has received a major push in the Interim Budget 2024 as the government plans to set up three major economic railway corridors to reduce congestion and logistics costs in India.
Industry stakeholders welcomed the government’s plans but have highlighted that certain areas still require attention.
Finance Minister Nirmala Sitharaman said in her budget speech today that three major economic railway corridor programmes will be implemented. These include energy, mineral and cement corridors, port connectivity corridors, and high-traffic density corridors. “These dedicated corridors will facilitate faster movement of freight and improve turnaround times, reducing logistics costs for India. Together with dedicated freight corridors, these three economic corridor programmes will accelerate our GDP growth and reduce logistic costs,” she added.
The government said these projects have been identified under the PM Gati Shakti for enabling multi-modal connectivity. These commodity-specific economic rail corridors aim to address congestion issues in rail lines, particularly in the eastern region. These dedicated corridors will facilitate faster movement of freight and improve turnaround times, reducing logistics costs for India. Currently, logistics costs account for approximately 12% of India’s GDP, which hampers its competitiveness, particularly in the manufacturing sector, compared with competing countries. Industry stakeholders say that by reducing traffic on transportation routes and improving the efficiency of freight transportation, the county can increase its logistical competitiveness. This, in turn, would attract more investment into the manufacturing sector, which is currently fragmented across the nation and heavily reliant on the health of the logistics and transportation industry.Mahesh Fogla, Executive Director, Patel Integrated Logistics Ltd, has mixed views on the budget. He lauded moves such as the additional fund allocation for infrastructure development, the emphasis on upgraded roads, the plan to double the number of airports and advance the railroad systems. Notably, Sitharaman increased infrastructure allocation by 11.1% to Rs 11.11 lakh crore. However, Fogla added that there were expectations regarding ease of doing business, including an increase in the threshold limit of GST, particularly benefiting MSMEs. Additionally, the introduction of an amnesty scheme for GST compliance was expected but it did not happen.Zaiba Sarang, Co-founder, iThink Logistics, said while the government revealed its intent to further spur sustainable logistics, with a push on enhancing EVs ecosystem, what was missing was specific numbers and mention of concrete measures to support this aim. Sarang suggested that providing additional clarity on financial support and waivers for companies involved in green logistics would have been helpful. This would have helped businesses understand the level of support they can expect and encourage more companies to actively participate in the transition towards sustainable logistics. She said while the government’s efforts to boost the logistics sector through initiatives like PM Gati Shakti and the national logistics policy are commendable, there seems to be a lack of clarity regarding the on-ground impact of these flagship projects. “It is essential for the government to conduct a comprehensive mapping of the outcomes and benefits of these policies. This will not only provide transparency but also help businesses, particularly MSME-based logistics players, understand how they can leverage these initiatives to their advantage. By addressing this issue, the government can ensure that the benefits of these policies trickle down to a larger number of logistics players.”
Industry stakeholders welcomed the government’s plans but have highlighted that certain areas still require attention.
Finance Minister Nirmala Sitharaman said in her budget speech today that three major economic railway corridor programmes will be implemented. These include energy, mineral and cement corridors, port connectivity corridors, and high-traffic density corridors. “These dedicated corridors will facilitate faster movement of freight and improve turnaround times, reducing logistics costs for India. Together with dedicated freight corridors, these three economic corridor programmes will accelerate our GDP growth and reduce logistic costs,” she added.
The government said these projects have been identified under the PM Gati Shakti for enabling multi-modal connectivity. These commodity-specific economic rail corridors aim to address congestion issues in rail lines, particularly in the eastern region. These dedicated corridors will facilitate faster movement of freight and improve turnaround times, reducing logistics costs for India. Currently, logistics costs account for approximately 12% of India’s GDP, which hampers its competitiveness, particularly in the manufacturing sector, compared with competing countries. Industry stakeholders say that by reducing traffic on transportation routes and improving the efficiency of freight transportation, the county can increase its logistical competitiveness. This, in turn, would attract more investment into the manufacturing sector, which is currently fragmented across the nation and heavily reliant on the health of the logistics and transportation industry.Mahesh Fogla, Executive Director, Patel Integrated Logistics Ltd, has mixed views on the budget. He lauded moves such as the additional fund allocation for infrastructure development, the emphasis on upgraded roads, the plan to double the number of airports and advance the railroad systems. Notably, Sitharaman increased infrastructure allocation by 11.1% to Rs 11.11 lakh crore. However, Fogla added that there were expectations regarding ease of doing business, including an increase in the threshold limit of GST, particularly benefiting MSMEs. Additionally, the introduction of an amnesty scheme for GST compliance was expected but it did not happen.Zaiba Sarang, Co-founder, iThink Logistics, said while the government revealed its intent to further spur sustainable logistics, with a push on enhancing EVs ecosystem, what was missing was specific numbers and mention of concrete measures to support this aim. Sarang suggested that providing additional clarity on financial support and waivers for companies involved in green logistics would have been helpful. This would have helped businesses understand the level of support they can expect and encourage more companies to actively participate in the transition towards sustainable logistics. She said while the government’s efforts to boost the logistics sector through initiatives like PM Gati Shakti and the national logistics policy are commendable, there seems to be a lack of clarity regarding the on-ground impact of these flagship projects. “It is essential for the government to conduct a comprehensive mapping of the outcomes and benefits of these policies. This will not only provide transparency but also help businesses, particularly MSME-based logistics players, understand how they can leverage these initiatives to their advantage. By addressing this issue, the government can ensure that the benefits of these policies trickle down to a larger number of logistics players.”
Vivek Juneja, Founder and Managing Director of Varuna Group, said the introduction of economic corridors promises to cut logistics costs. The reduced corporate tax and GST benefits would result in cost savings for 3PL and streamline trade through improved customs procedures. “With a decline in import release times and overall customs improvements, the budget sets the stage for a dynamic and efficient future for the logistics industry,” Juneja added.
