A number of logistics companies, including Safexpress, have prepared a wishlist for the government prior to the Budget 2009. A key demand is the provision of industry status to the supply chain and logistics sector, one which they have been calling for at various forums and at regular intervals. They believe it is time the government takes concrete measures to enable growth of the sector.

The supply chain and logistics sector has today grown into a $100 billion industry and contributes substantially to the development of the Indian economy. At present, in an economic downturn, the sector has a pivotal role to play if the economy has to return to normalcy. India spends 13 percent of its GDP on supply chain and logistics as opposed to 10 percent by other developing nations. The Indian economy is striving for improvements in supply chain management and logistics services to gain a competitive edge and it would help if the government takes a more cohesive approach, feel industry chiefs.

The latest logistics service provider to ask the Indian government for providing industry status to the supply chain and logistics sector is Safexpress. According to its GM – marketing, Vineet Kanaujia, “Our most important recommendation to the government would be to recognise the supply chain and logistics sector as a full-fledged industry. In this Budget, it must provide an industry status to supply chain and logistics. A regulatory body should be created by the government to look into the concerns of this sector. Given the massive contribution this sector makes in the growth of our economy, it is imperative that it should be provided an industry status at the earliest.”

Highlighting the importance of the sector, he added: “We must remember that a major part of our economy is hugely dependent on the supply chain and logistics sector, which is one of the largest employment providers of our economy and employs more than 45 million people. For India Inc to grow at the rate of 8-9 percent, this sector will need to contribute the maximum, otherwise growth can’t be achieved at those levels.”

Key challenges

Discussing the key challenges the industry faces, Kanaujia said, “Inefficient infrastructure could be the single most critical issue India faces today. Despite impressive economic growth, India’s dilapidated roads, congested ports, inadequate power and complex State regulations are impeding development in the supply chain and logistics sector. National highways form only two percent of the entire road network in the country, but handle over 40 percent of the national road freight traffic, putting tremendous pressure on the highway infrastructure as well as resulting in severe traffic bottlenecks. On an average a commercial vehicle in India runs at a speed of 20mph/32kph compared to over 60mph/96kph in the developed markets of the US and Western Europe.”

Kanaujia added that the present pace of road infrastructure development in India is slow compared to other developing economies. “The quality of our roads in comparison with China is well below expectations and our poor hinterland connectivity is affecting the trade growth in our country.”

Kanaujia further emphasised the development of road infrastructure in the country. “High transaction costs arising from an inadequate and inefficient infrastructure can prevent the economy from realising its full growth potential, irrespective of the progress on other fronts. The sooner our government takes some concrete steps to improve this situation, the better it would be,” he said.

Talking about his expectations from the Indian government in the upcoming Budget, Kanaujia said, “Efficient infrastructure is the key to the growth of the sector in India. We would request the government to increase its thrust on infrastructure development and to take initiatives for faster development of roads. The Budget for 2009-10 must encourage private and FDI inflows into infrastructure and must ease regulatory hurdles in order to facilitate building of a world-class infrastructure.”

Kanaujia said that in order to sustain growth, India needs significant investment in infrastructure including roads, rails and ports to facilitate quicker and more efficient movement of goods across the country. The government must take serious steps in this direction on a priority basis, he said.

Reducing bottlenecks, hiking efficiency

“India also has complex regulatory structures which form a major bottleneck and bring down the on-road time of vehicles substantially. The bulk of the time which a vehicle takes in moving from one location to another is spent idling at various check posts. Delivery vehicles are forced to take long halts as they are required to complete the formalities and to pay the cross-border fees at the State borders. The government must take strong measures to ease these regulatory bottlenecks. Also, check posts must be automated on a war footing throughout the country. This could result in faster processing of documents and boost the operational efficiencies of logistics companies,” he said and added that multiple toll points on highways reduce efficiency and increase the delivery lead time. Also, the non-uniformity in toll charges creates irregularities in the cost structure.

Kanaujia recommended that the government implement a centralised toll mechanism to bring about uniformity in toll charges across different check points. This will help in curtailing the downtime and enhance efficiency by increasing the on-road time of vehicles. Regulatory hurdles like permits for moving goods to different States and documentation at various check posts also need to be eased out.

With respect to the varying tax structures across various States, Kanaujia said: “Clearances from a host of government bodies take a very long time. Our economy is losing billions of rupees every year because of State-level entry taxes along with the related cost of fuel and the waiting time at check points. We would request the government for a uniform tax structure across the country to simplify the government procedures with respect to movement of consignments.”

Speaking about the dearth of skilled professionals in the supply chain and logistics sector, Kanaujia said: “There is an enormous shortage of skilled manpower in the supply chain and logistics sector. There is a scarcity of theoretical knowledge as well as practical expertise in this business. This leads to low skill levels that could hinder the growth of this sector as well as the economy. We request the government to acknowledge the requirement of skilled manpower for this sector and to focus on the augmentation of skills by developing academic institutes and by introducing specialised courses for supply chain and logistics in leading institutes.”