The Central Government must keep its policy of supporting the logistics sector by keeping the cost of rail transportation competitive in Budget 2022, according to head of one of the leading logistics players in India.
The decision to not increase rail freight in the previous year and various discount schemes for cement movement have helped the industry stay competitive vis vis vis-vis road transportation resulting in the modal shift from road to rail, chairman managing director of Apollo International, Raaja Kanwar told Business Today.
Kanwar said the industry must be adequately incentivised to fully utilize the eastern and western sections of the Dedicated Freight Corridors DFCs in June to coincide with the 75th anniversary of Indian Independence.
ISO tanks used to move chemicals through rail have a high asset cost. DFC would bring inefficiencies by improving the turnaround time for them, he observed.
The state of Gujarat and Maharashtra have a large concentration of the country's chemical industry, which is the sixth largest in the world.
We expect the government to keep DFC freight at the same level as the existing rail freight. The government may consider discounting schemes for empty tanks on the return leg to encourage the shift to rail, as well as to encourage modal shift to rail, according to Kanwar.
The mandatory Petroleum and Explosives Safety Organisation approval for movement of chemical and petroleum products is one of the key challenges that ISO tank operators have to deal with. Their multimodal movement from rail to road is hampered by restrictions on the use of ISO tanks.
The government may allow the use of ISO tanks for road transportation because the tanks are manufactured outside India and are certified by various global classification societies for safe transportation.
The use of clean energy sources in the industry is one of the main areas of focus for the government, logistics service providers and users to switch to cleaner alternatives to diesel, such as liquefied natural gas LNG and electric vehicles.
Kanwar argued that the government may look to encourage this shift through favourable incentive mechanisms.
Kanwar said that the growth was hampered by the lack of quality warehousing infrastructure in Tier 2 and 3 cities, due to the impressive gains made by the e-commerce industry in the recent past.
He noted that he believes that government will help in the development of better-quality infrastructure in those cities through attractive financing terms such as lower interest rates and longer tenure for borrowings.
The industry expects a fiscal window on issues like taxation and customs activities to become more competitive globally, in addition to providing the necessary incentives. Kanwar said that the budget must keep logistics as one of the priority areas, considering its importance and associated benefits to other sectors and foreign trade.