Goods & Services Tax is changing the landscape of Logistics sector rapidly

Posted by Daily Shipping Times on 18-12-2017        Tweet

KOLKATA: With the increasing use of technology and consolidation of warehouses, GST is bringing about an architectural change in India’s logistics sector, feel experts.

Despite making an improvement in the World Bank Logistics Performance Index at the 35th position in 2016, India is still eight places behind China (27), and the cost of logistics to GDP is way above the global average.

One of the reasons behind this is the multiplicity of warehouses and movement of goods in smaller parcels. FMCG and auto companies in India maintain as many as one warehouse per State. In comparison, the entire Europe and US is catered to by six to seven warehouses

Risabh Goel, Partner, The Boston Consulting Group, says the change has started brewing. “One of our clients have already reduced the number of warehouses from 24 to 18. I expect the number to go down further in the next few years,” he said recently on sidelines of a CII seminar on logistics.

A fall in the number of warehouses means the same amount of goods would be stored by lesser warehouses. This triggers the next round of change in the transport sector – bigger trucks and faster transport would be in demand.

“We expect the average truck size in India to increase from 16 tonnes to 24 tonnes in next few years,” he said. Goel is also hopeful of transporters following the example of Rivigo, a Delhi-based start-up that delivers goods between Delhi and Mumbai in 40 hours.

Rivigo operates trucks on a relay model where drivers are replaced every eight hours. The non-stop movement ensures better asset utilisation, bringing down the net cost of transportation.

According to Goel, the net impact of the consolidation of warehouses and faster and more efficient transportation can bring users 20 per cent savings on logistics costs.

GPS sales

There are apprehensions among experts that the change may be slow due to resistance from the truck transporters’ lobby.

However, Shoummo Acharya, Founder & Chairman of Kolkata-based eTrans Solutions, feels the winds of change have finally started blowing.

eTrans offers tracking technology solutions to transporters. In the first eight months of this fiscal, the company sold 60 per cent of the combined sales of the last 10 years.

The customers are not large fleet owners. “Most of our new customers own one or two trucks,” he said, adding that the cost of GPS can be recovered from one round trip.

To tap the future market potential, eTrans introduced low-cost re-usable RFID (Radio Frequency Identification) tags

One stumbling block in improving the logistics efficiency is that Indian Railways doesn’t give transit assurance to its customers, said V Kalyana Rama, CMD, Container Corporation of India (CONCOR).

He was quick to add that railways is trying to improve its service quality under the existing Rs. 5,00,000-crore investment plan.

Confirming that GST has triggered changes, Rama said that CONCOR is building 20 logistics centres on 250-300 acres each across the Country in the PPP mode.

The company is also enabling its operations with Radio Data Terminal (RDT) technology to ensure the continuous tracking of containers.