After initial slowdown, Logistics sector back on the fast track

Posted by Daily Shipping Times on 09-11-2017        Tweet

NEW DELHI: After a brief slowdown due to the structural reforms like demonetisation and GST, the Logistics industry appears to be getting back on the recovery track. There has been a spurt in the use of digital payments and electronic transactions, and this has, in fact, benefited some logistics companies substantially.

However, now that the pressure of demonetisation has eased, cash is back as the preferred mode of transaction in an industry where over three-fourths of business is in the unorganised sector.

After Prime Minister Narendra Modi made the demonetisation announcement on the night of November 8 last year, truckers on the road were surprised as they couldn’t pay toll fees or get repairs done. The Government responded by waiving toll charges for about a month.

“Truck rentals also went down due to a drop in toll charges and shrinkage in overall business. But, despite the drop in business, the margins were not much affected because the retail rentals for SMEs did not go down,” says SP Singh, Senior Fellow, Indian Foundation of Transport Research and Training (IFTRT).

E-payments up

The National Highways Authority of India (NHAI) reports a 50 per cent growth in digital payments between January and September 2017. The number of Fastags — or RFID tags — touched 6 lakh in September this year, from about 2 lakh in December 2016.

KK Kapila, Chairman, International Road Federation, says that while the intent behind the note-ban was good but could be implemented in a better manner. Along with the unorganised sector the organised logistics sector was affected too, but has recovered to a large extent. Listed firms in the sector, such as Concor and BlueDart, were hit for the first eight-nine weeks but recovered, according to analyst reports. Recently the Concor Management had said in an analyst conference call that a gradual improvement in liquidity should lead to a shift in cargo from roads to railways, where business is largely on a non-cash basis. According to IIFL, Concor’s CMD Kalyan Rama said in an analyst call this year that a pushback in volumes due to demonetisation lasted three-four weeks; volume growth recovered in December 2016 and reached pre-demonetisation levels in January 2017.