100% FDI allowed for free trade warehousing zones

With government allowing 100% FDI to promote Free Trade Warehousing Zones (FTWZ), a number of large national and international players are expected to enter the business. Also a number of logistic parks are also expected to come up across the country. Indian  companies Modern India, Arshiya International, Balaji Infra Project, Fab City SPV, Chennai-based Jafza Business Park and Chiplun Infrastructures Private Ltd  are  making a beeline to develop free trade economic zones (FTWZs) with a possible logistics support services set up .

Development council for logistics sector
The government plans to create a council for the development  logistics sector to enhance efficiency and reduce cost for movement of  goods across the country. The move aims to help the industry, particularly the growing retail sector. The council would devise and implement projects that would help in bringing down India’s expenditure on logistics from 15% of its gross domestic product (GDP) to about 9-10%. While work on physical infrastructure projects like roads, ports and highways is progressing smoothly, there is need to streamline policy and procedures for integrated growth of the logistics sector. The proposed development council would aim at providing valuable inputs for the growth of the industry as well lend its direct support to the sector.

Another objective of the council is to develop an organised truck industry as about 75% of the total expenditure on logistics goes to this sector. A unified system to tackle issues like multiple toll booths, state road barriers and check-points would be developed that would prevent cost and time over-runs. About two lakh trucks are added to the domestic fleet of trucks every year. However, the country manages to utilise only 60% of the resources due to idling at multiple check points and toll posts in the country.

The proposed council would comprise of members from both industry and the government. It would facilitate financing of projects and provide technical assistance to build a world-class logistics industry in India. It would also give valuable policy inputs to the government for the growth of the industry.

The council will also work on improving the software and procedures for the logistics industry as a whole and provide fast means of movement of goods via road, rail, sea and inland water. The private sector will be roped in to make the majority investment as so as to speed up the movement of goods as well as use the existing resources in a better manner.
Phased introduction of VAT in India
In the pre-VAT era, logistics providers faced different costs in doing business in different states. A number of companies set up warehouses in different states to reduce the tax burden. With the phased introduction of VAT, it is hoped that there will be greater centralization and companies will move to a hub and spoke model. This rationalisation will lead to more savings for the third party logistics providers.

Policy initiatives to facilitate growth of logistics Industry.
Recommendations made by 11th Plan Sub-Group on the Multi-modal Transport sector for providing seamless connectivity state that accelerated and time bound implementation of GOI 11th Plan initiatives need to be implemented on an urgent basis. These are building critical infrastructure (airports, highways, ports, and railways), which will foster growth of domestic manufacturing, retail, auto, textile sector and economy as a whole and will reduce the complex structure of logistics currently present in the country. Due to the policies such as rationalization of the tax structure, introduction of tonnage tax in shipping, uniform Value-Added Tax (VAT), and the growth of outsourcing of warehousing and distribution- the market will see the addition of more 3PL providers and logistics companies

Changing consumer trend towards convenience and processed foods provide a future for greater storage capacities. In addition, introduction of Value added tax (VAT) and a potential shift to a national Goods and Services Tax are also likely to provide an impetus to the sector. Government of India (GoI) is also taking initiatives such as national highway development program and is partnering with Indian Railways to establish storage infrastructure.