Logistics revenues set to cross Rs 5 lakh crore in five years’ time

MUMBAI: The Indian logistics sector is expected to clock Rs 5,96,114 crore in annual revenues by 2013-14 on the back of strong growth in economic fundamentals as well as favourable regulatory environment. The introduction of goods and service tax (GST) from April 1, and the development of logistics parks will be a boost to the sector, which will post a 11% compound annual growth rate for the next five years, according to research firm Crisil.

The logistics industry revenues are pegged at Rs 3,60,000 crore in 2008-09, which includes primary transport modes and infrastructure as well as secondary movement (from the hub to various depots). This accounts for 10.7% of GDP, which is significantly higher than 5-7% that is registered in developed nations.

���A strong growth in the sector is expected, following a favourable regulatory environment, greater thrust on logistics infrastructure spending and the changes that we expect from organised players gaining a larger market presence in the industry,��� Crisil Research head Manoj Mohta said on Wednesday.

Logistics refers to the procurement and movement of goods and storage of inventory across the supply chain. The Indian logistics sector is fragmented, with around 80% of freight being carried by operators in the unorganised sector.

The changing tax regime would trigger the formation of regional hub-based infrastructure (as opposed to multiple warehouses). The realignment of infrastructure needs would aid in the reduction of the number of intermediaries and also help streamline supply chain operations, Crisil said in a sector report.

The investment-linked tax deduction for setting up a cold chain facility for agriculture warehousing announced in Budget 2009-10 is also likely to provide the much required impetus to the warehousing and cold chain industry.

���This is likely to have a huge impact on the agriculture industry where logistics costs account for 15-16% of the industry���s total revenues. At the same time, the fruits and vegetable segment is plagued with wastage to the tune of 30-40%. Improvement in infrastructure would go a long way in bringing down wastage levels,��� it said.

Crisil has estimated that with efficient infrastructure, wastage levels can be brought down to around 25%.

Infrastructure creation would also enhance the quality of produce and lower the prices for end consumers.

���Essentially, the measure would attract more investment, specifically in the food processing industry, which would help increase the share of processed food in both domestic as well as export markets,��� said the report.