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Kartik Shah

CEO at Coldrush logistics

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What Does The Logistic Industry Expect From The Budget For 2022?

Although the government has been proactively working to extend support to businesses, there is a need for more such initiatives to add to India’s growth story.

The pandemic struck the world and disrupted economies overnight. However, as people are confined to their homes once again in the wake of the new variant Omicron, logistics is serving as the backbone of the trade industry, fuelling its growth and expansion. Thanks to the government for taking several laudable initiatives, including toll-free roads, loan moratoriums, tax extensions, and support for PF payment, among other things – all of which have helped businesses ensure continuity, even during challenging times like these.

Although the government has been proactively working to extend support to businesses, there is a need for more such initiatives to add to India’s growth story. Now that the Financial Budget is around the corner, all eyes are on Finance Minister Nirmala Sitharaman to help the country navigate through the third pandemic wave and steer Indian towards progress and betterment. In this regard, let’s look at what the logistics industry expects from budget 2022.

Inclusion of fuel under GST

The logistics industry is already coping with rising fuel prices and its non-inclusion in the GST regime. Furthermore, the GST on fully built logistic vehicles is 18%. As a result, lowering the GST slab for the same will significantly help the industry. While bringing fuel under the GST regime will benefit the entire industry, it is a more complicated issue than simply making budgetary changes. Hence, the government must take steps to relieve the burden of transportation expenses while also ensuring that operations are not jeopardized.

Subsidy on a vehicle carrying perishable items

The processed food sector is burgeoning, necessitating the use of logistical transportation. On the other hand, the logistic segment has a higher CAPEX cost, making the liquidity cycle more stringent. As a result of the high CAPEX involved in logistic vehicles, the government must consider extending the subsidy plan to vehicles that are not involved in operations associated with fruits and vegetables. This initiative will help the industry flourish and grow.

Focus on building cold storage

Logistics is pivotal to increasing reach, reducing wastage, and building cold storage units in the country. The central and state governments own much-unused property in ideal locations that might be leased to build warehouses and cold storage facilities. This will cut down on inefficient movement while also bringing down costs and enhancing productivity.

Reducing import duty on cold storage equipment

The cold storage industry relies heavily on imported equipment. So, a reduction in import duties and the government's attempt to encourage cost-effective Indian-made equipment would provide a twofold boost to the sector.

In addition, the government has pushed for the use of solar power, although many medium-sized logistic companies cannot afford it. Hence, incentivizing the sector and looking into the possibility of duty-free solar electricity for cold storage will not only encourage its use but will also contribute to the larger goal of lowering carbon footprints.

Uninterrupted support from banks

There is always a need for finances to run a firm. And, for an important sector like logistics, it's imperative to have additional support from banks in the form of longer loan tenures to ease the liquidity cycle of the business. As a result, the government must ensure that the loan is supplied without collateral and at reduced interest rates with a government guarantee.

Bottomline

As per the Logistics Skill Council report, Indian logistics is valued at $150 billion, accounting for 14.4% of the nation’s GDP. For this sector to flourish, reduced duties, longer tenure loans with a government guarantee, and a strategy to create the ecosystem to develop a sustainable and efficient cold chain are the primary challenges that the logistic industry is expecting the government to address in the upcoming budget.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house



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