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The special plenary session of CII-Logistics
2007 Summit held in Chennai on September 20, 2007, made a strong
case for obtaining industry status for the logistics sector and
its strategic importance for enhancing India’s competitiveness
in global trade. The CEOs panel discussion, which followed,
highlighted the issues faced by the sector and the need to
address inefficiencies and improve competitiveness.
R Narayanan, director – KPMG Advisory
Services, said, “Although the sector is growing in value as well
as in volume terms leading to sustainable opportunities in the
logistics space, India’s logistics cost is among the highest in
the world - estimated to cost almost 13 per cent of its GDP.”
Logistics costs in India are estimated at
over Rs 4.5 trillion, growing at a CAGR of 8-12 per cent.
Significantly, the Rs 4.3 trillion logistics sector employs
close to 40 million people. This is more than the information
technology industry employing 4.3 million people.
“Currently, road freight rates in India are
one of the lowest worldwide. Two-thirds of the overall logistics
costs arise from transportation and warehousing. However, 86 per
cent of the road transportation sector is dominated by the
unorganised sector with a plethora of very small players, with a
turnover of less than Rs 30 lakh per annum. Many of them are
single truck owners. Intense competition among these players
leads to low freight rates and hence low profitability,"
Narayanan added.
Although the warehousing sector is also
seeing rapid changes, third-party warehousing in India comprises
only 30 per cent of total private warehousing, compared to the
international benchmark of 70 per cent. The warehousing sector
is likely to become more sophisticated, organised and
consolidated in the near future with more companies choosing
outsourced supply chain services. Changes in tax regime is
expected to encourage product owners to consolidate their
warehouses, resulting in lower inventories and, hence, lower
carrying costs. While skill gaps exist across segments, the
situation is particularly severe in the case of transportation
and warehousing segments.
A. Balasubramanian, principal – Advisory
Services, Infrastructure Development Finance Company Ltd, said,
“Ports and rail freight are witnessing growth in container
handling with demand outstripping supply.” He said, “It is
necessary for ports to create opportunities for themselves and
move along the value chain by providing logistic platforms.”
Belgium, as the partner country for
CII-Logisitics 2007 Summit made a case for Belgium and
specifically Flanders, as the logistics destination for Europe.
Francis Rome, director – Business
Development, Flanders Institute of Logistics, said, “Sixty per
cent of Europe’s purchasing power is located within 300 miles of
Belgium and especially Flanders. With 400 centres employing
25,000 people, Flanders has the highest concentration of
logistics support.” He added that “Belgium’s proximity, extended
gateway and connectivity along with trained manpower provided
key advantages.”
In the current global market, supply chain
trends sought are multi-modal transportation and convergence in
policies at the government level instead of distinct policies
for each segment of the logistics sector. A major trend expected
is free trade lanes, although supply chain security is a global
challenge in this regard.
With the need for specialised logistics
service providers, there is an increasing trend towards
outsourcing supply chain activities. Because of India’s
strategic importance in the global economy and huge consumption
base, domestic and international players are showing strong
commitment to the sector.
While things are looking up for the Indian
logistics sector with the government also initiating some
longstanding revisions in regulations and tax structure, it was
felt that industry status will help address the inefficiencies
inherent in the sector.
The CII-Logistics Summit attracted over 400
delegates representing diverse segments of the logistics sector
from across the country
R Rangaraj
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