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Logistics sector gets infrastructure status in India

Logistics sector gets infrastructure status in India

In an effort to amalgamate development efforts, the Indian government has included logistics including cold chain and warehousing facilities within the gambit of infrastructure sub-sectors. The integrative move facilitates cohesive strategies to plan transportation, energy, telecommunications, social and commercial networks.

How does the Indian government define logistics infrastructure?

The following logistics sector developments qualify as infrastructure projects:

  • Multimodal logistics park with an Inland Container Depot (ICD) with a minimum investment of INR 50 crore and minimum area of 10 acres or 435,600 sq. ft. 
  • A cold chain facility with a minimum investment of INR 15 crore and a minimum area of 20,000 sq. ft.
  • A warehousing facility with a minimum investment of INR 25 crore and a minimum area of 100,000 sq. ft.

What are the advantages of logistics getting infrastructure status?

Expedited and secure logistics development

The Indian government expects logistics to be valued at USD 360 billion by 2032 and generous financing options are a crucial incumbent to growth at this scale.

Under its new status, the logistics sector can avail of financing options previously limited to infrastructural projects. Logistics now qualifies for external commercial borrowing (ECB), which permits access to high-value capital injections. Logistics projects may also approach insurance companies and pension funds for longer tenure options. Most importantly, the logistics sector is now eligible to borrow directly from India Infrastructure Financing Co. Ltd (IIFCL). According to the IFFCL budget report, the entity sanction USD 4.13 billion in loans and disbursed USD 1.88 billion in funds between FY2015-16.

Indian logistics, specifically warehousing and multi-modal hubs, have already cornered coveted private equity and private sector investments from international firms.  Public sector financing will likely only make the sector more secure and therefore, a better investment for private firms. Additionally, government bankrolls make funds cheaper, which further expedites and optimises logistics expansion.

Deep cost-savings with heavy economic benefits

India wastes 40% of all harvested agricultural produce – that is more fruits and vegetables than the entire United Kingdom consumes and more grain than Australia produces each year. Besides contributing to poor health conditions and threatening the well-being of hundreds of millions of Indians, food wastage commits grave economic damage, costing the nation over $14 billion or INR 92,000 crores in lost crops alone and disseminating environmental damage by squandering water, fuel and deforested land.

Access to funding and a government support network, will allow the nation to establish an adequate number of cold chain facilities as well as better quality warehousing and transportation. It will also protect and enhance India’s agrarian economy, which accounts for 60% of the nation’s labour force.

According to Deepal Shah, chief executive of Avvashya CCI Logistics Pvt. Ltd, enveloping logistics within infrastructure “will lead to better access to funds and consequent rise in investments for industrial parks, warehouses and transportation, (thus) providing a major fillip to consumption.”

India has already sanctioned widespread projects to catalyse logistics and transportation neurals in the nation. 35 multimodal logistics hubs are among the various new developments that will support 50% of freight movement, reduce logistics costs by 10% and curb transport-related carbon dioxide emissions by 12%.

India’s rank jumped from 54 to 35 under the World Bank Logistics Performance Index in 2017. This progressive step towards fueling and mentoring logistics sector growth will further boost India’s infrastructural capacity and efficiency towards internationally competitive standards.

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