Logistics sector to witness greater growth
The Indian logistics cost will come down as the sector is all set to witness more growth in the days to come, reveals S. Ramakrishna, Chairman, FFFAI, as he looks at the opportunities and challenges facing the freight forwarding community
Q What are the pressing issues that the freight forwarding industry is facing today?
The challenges are many in terms of reduced volume of business, the margins have to be compromised to sustain, recovery of dues in time etc., but at the same time the avenues are also opening up such as new MMLPs, inland waterways, AFS, where the CB and freight forwarder would get newer opportunity to work. Reduced margins and mergers of shipping lines have posed more challenges for the freight forwarding community. There are also disturbing trends of carriers getting into end-to-end solutions.
Q How has been the business in 2018?
The business in 2018 has been slow for the various reasons, mainly due to global recession, oil prices and fluctuation in foreign currencies, but at the same time the exporters have benefited from exchange rate surge. There was also an issue about the understanding of GST which also reduced the trade in the financial year. However, the scenario has changed dramatically now with better understanding and facilitation from the government as well as due to proactive initiatives from association & stake holders. In 2019, we look forward for positive growth in industry especially with the latest accord with UAE and Iran with rupee trade agreements.
Q How has the freight forwarding industry responded to automation, transparency and closer interaction with the regulatory bodies?
Ministry of Finance in coordination with other related Ministries have been having regular interactions to bring all agencies into the ambit of SWIFT. This is already the norm where major PGAs are online.
Q The logistic sector is expected to grow from $160 billion to $215 billion by 2020. What is going to be the change?
The logistics sector will grow for sure especially with cold chain which are being set up, UDAN scheme of the Ministry of Civil Aviation, setting up of AFS to cater to the various small airports to have hub and spoke model, creating India as a major transhipment hub for nearby countries.
Q The Western DFC should be on the rails in about a year. What potential does the freight forwarding industry see here?
DFC should reduce the cost drastically. The challenge would be disparity of imports vs exports in terms of container from hinterland to the port. DFC could also be utilised for Ro-Ro vehicular movement for air shipments apart from containers.
Q How can FFFAI contribute in reducing logistics cost?
It would be the economy of the scale which would reduce the cost, our endeavour should be to achieve that. The E Way bill and GST did reduce the logistic cost but the surge in fuel price actually took the sheen out.
Q Is our freight forwarding industry still unorganised? Has it evolved from being a service provider to offer end-to-end solutions?
It is harsh to say it is an unorganised community. We have been requesting the government for industry status for the entire cargo business which would help us in funding. Our sector has contributed majorly to exchequer in service tax earlier and now in GST. Service sector does dominate the GDP contribution in the Indian economy. Q Your expectations on the regulatory front? The government has included logistics sector in the harmonised master list of infrastructure sub-sector and this is a very welcome step. This in fact is the first step towards recognition of logistic sector as an industry according to us. The Ministry of Finance along with Agriculture, Ministry of Health and other government departments have joined hands in reducing the dwell time by automation process with ICEGATE which is a phenomenal improvement by participating government agencies. The Reserve Bank of India through their portal have substantially reduced the discrepancies in the transactions of exim trade by auto populating the exim data from Bills of Entry & Shipping Bills.