Logistics sector gets infrastructure status

Sanjeev Sharma

Tribune News Service

New Delhi, November 20

The government has granted infrastructure status to the logistics sector, including cold chain and warehousing, which is likely to reduce cost of capital and encourage job creation and manufacturing.

The logistics sector has already got a major boost with the implementation of GST as transportation and warehousing efficiencies are likely to go up with the removal of barriers.

The inclusion of logistics sector in the harmonised master list of infrastructure sub-sectors was considered in the 14th institutional mechanism (IM) meeting held on November 10. It was recommended by the institutional mechanism and subsequently approved by Finance Minister Arun Jaitley.

“Logistics Infrastructure” has been included by insertion in the master list of infrastructure sub-sectors in the renamed category of “Transport and Logistics”.

The category includes multi-modal logistics park comprising inland container depot (ICD) with minimum investment of Rs 50 crore and minimum area of 10 acres, cold chain facility with minimum investment of Rs 15 crore and minimum area of 20,000 sq ft and warehousing facility with investment of minimum Rs 25 crore and minimum area of 1 lakh sq ft.

The infrastructure status for logistics would give a boost to both domestic and external demand thereby encouraging manufacturing and job creation.

The move will enable the logistics sector to avail infrastructure lending at easier terms with enhanced limits, access to larger amounts of funds as external commercial borrowings (ECB), access to longer tenor funds from insurance companies and pension funds and be eligible to borrow from India Infrastructure Financing Company Limited (IIFCL).

The logistics cost in India is very high compared to developed countries with some estimates at 13% of GDP. High logistics cost reduces the competitiveness of Indian goods both in domestic and export market.

Pirojshaw Sarkari, CEO, Mahindra Logistics, said the infrastructure status will reduce the cost of capital in transportation and warehousing, thereby reducing the cost of logistics.

“GST is expected to be a major driver for this improvement. Post GST, the warehouse sizes are expected to increase. In order to serve these large capacities, higher tonnage trucks will be required. This would mean new investments”, he added.

Anshuman Magazine, Chairman, India and South East Asia, CBRE, said the granting of infrastructure status to the logistics sector will result in higher investments.

“With India’s growing economy and boost to the sector, increased movement is expected in the industrial and warehousing segment. Both cold chain and warehousing facilities are covered in the announcement and will go a long way in strengthening infrastructure development across India”, he added.

To get loans on easier terms

• Infrastructure status to the logistics sector will help it access loans on easier terms, encourage manufacturing and help improve economic growth
• The sector covers cold chain, warehousing facilities and multimodal parks comprising Inland Container Depot, subject to certain conditions
• The sectoral players would also be eligible to borrow from India Infrastructure Financing Company Ltd