Maintaining cashflows is the priority


“When the first lockdown was announced we had continuous engagement with colleagues and the first feedback was to focus on maintaining cash flows,” reveals Shantanu Bhadkamkar, President, AMTOI

What is the most pressing concern that multimodal transporters have today?

When the first lockdown was announced we had anticipated it will go on atleast for a month and we had continuous engagement with colleagues and the first feedback was cash flow and I belong to the bottom line school with primary focus on profitability and sustainability. But we were a divided house with focus on cash flow which is actually fund flow. Maybe, a small minority among us feels that viability, sustainability and profitability will be the key issue, because everybody among us are self funded and we have capital accumulated over the past decades. So we are not borrowers in our industry, particularly the established ones.

Today I can essentially say that all the colleagues with whom I interact have possibility of surviving this crisis, those who don’t have the capacity to survive is another category. They essentially say that it is profitability because the peculiarity of our industry is that salaries constitute between 65-80% of our net revenue. That being the case, as the lockdown started and along it came the slowdown, so loosing so much of revenue itself is a big challenge.

Some of us who are lucky are working at 50-60% capacity and that reflects on the statistics that seaports and airports communicate. People like me are doing bad because industry that comprises of our missing clientele into automobile and engineering are not doing well at all. The 20-25% business remaining with me comes from the agri industry. Industries such as steel and glass that need to operate 24X7 have been permitted to work. This is the kind of mixed picture I am giving now. Another geographical variation can be Mumbai-Pune zone has been the worst effected in the entire country. These locations have even lower volumes operating. It’s a mixed bag but this is largely how it is operating.

It is estimated that our industry faces about 50,000 crores of loss today due to COVID-19. Is the government doing enough for the industry? What do you expect the government to do?

It is difficult to quantify the losses at the moment because logistics industry is the mixture of apples and oranges – some of our sectors are highly organised like multimodal transporters – we are the most organised sector in the industry. We have associations of every sector, we have consultative process with government and amongst each other, we are locally and nationally organised.

Now there is a part which is completely unorganised, ofcourse I know there are good statistical tools  to workout, but I believe, considering logistics is 14%, of which one-third comes to transportation and forwarding, taking about 5% of GDP would be logistics is a fair estimate. What we have seen is government has supported people who are big borrowers, so there is a pro-borrowing bias whereas we feel if you fuel borrowing it will backward spiral and it is like good money chasing bad money. This government has to protect jobs, it has to protect and help companies, like it is happening in many other countries who are paying 50% salaries. So government should support businesses who are paying full salaries and retaining staff. I am not in favour of direct cash transfer where a person sits at home and gets money. A more economically sustainable way is to give money to person who employs. Europe would have faced even worst crisis had they not supported their manufacturing sector.

Before COVID-19, our challenges, issues and priorities were different. Will the narrative change in the post COVID-19 scenario?

Let’s look at ourselves – who stands the chance of being effected by COVID-19 most? One whose immunity is week and one who doesn’t maintain a healthy lifestyle. The same applies to business as well. We had certain demands with the government for ease of doing business, we had certain demand about the law compliance becoming more feasible – the smaller organisations are finding law compliance extremely hard, but I heard even the President of a large organisation saying law compliance has become extremely complicated in spite of putting a lot of resources. For ease of doing business to really translate for our sector is one demand, secondly we are the last among the least when it comes to enforcement of contract. Earlier customers could delay the payment if at all they wanted, but today most of them are trying to dodge money because it has become a habit now. You can’t imagine an economic system wherein a smaller player finances a large organisation for 30-120 days. These are typical demands we had with the government and they have been responding. A lot of new reforms are coming up in this area compelling companies to pay SMEs sector within 45 days. Here I can share an experience, one of my clients – a global corporation wrote me a cheque of Rs.35 lakh for their non-compliance of payment within 45 days. I can guarantee none of the big Indian corporates have this business ethics. So, my lobbying with the government will be less on government issues but big corporates all over the world talking about good governance should first look into the mirror when it comes to making payments to SMEs sector.

As the Former President of Maharashtra Chamber I can share, our Secretary General has a Udyog Adhaar Scheme for making the payment, if you see the complaints about delayed payments, non-payment and frivolous disputes it runs like goose scoop. So I say that pre-COVID or post-COVID – what was good for economies health, industry’s and SMEs health will be the same. Everybody has to focus on good business practices, good governance. The digitisation of commerce or the IVth Industrial Revolution will be accelerated by this pandemic.

Ministry of Commerce is trying to revisit draft National Logistics Policy. As the President of AMTOI what is your wish list?

When we talk about the cost of logistics being 14% of GDP, it is a mixture of so many things – like the service sector’s contribution to GDP is 52%, so goods and agri produce comes to 29% and it has no empirical evidence to it. In Calculus there is a rule that when we want to solve a big complex sum, we take it to the smallest component of it, each equation needs a different treatment. We will have to see why the logistics cost is high in each segment. We can’t have PPP models on revenue sharing basis where revenue share of government ranges from 48-54% and this model converts government monopoly to private monopoly and we are expecting logistics cost to reduce. The fundamental logistics infrastructure is being operated on these lines. Take for instance road transport, it is the most heavily taxed service. The GST on trucks is exceptionally high, the state and other charges on diesel fuel are exceptionally high and everywhere you have toll plazas.

So we need to first workout what is the component of tolls, taxes and the contribution of PPP on all these charges, then you consider what is the actual logistics cost. Notwithstanding all these things the entire transport cost is only 30%. Balance things are damage to fruits and vegetables in transit and inventory holding. Now if you try to put this altogether and address it, it will not be possible. You pick few areas to be focused upon, have reliable statistics for it and people should sincerely listen to us. You cannot bank on consultants for this job, because across the world there is a pro-practicing professional approach. We should stop relying on consultants.

One big change government can have for reduction of logistics cost is – relooking at how logistics cost is being worked out. This requires a surgical method, a short gun approach doesn’t benefit. The second thing out industry needs is growth of GDP. Our industry thrives on growth of exim trade and growth of GDP. So these are two things I will ask from the government.