31 January , 2023 Fdiindia
Decoding the Expectations of the Indian Warehousing and Contract Logistic Sector from the Union Budget of 2023-2024
In the post-COVID era, the logistics and supply chain of India has emerged as an important backbone for the Indian economy and now continues to be the crucial step for strengthening the position of the nation as a global economic power.
A robust and cost-effective logistics and warehousing sector has become an important factor in the global business and economic environment currently and has been the main focus area for the Government of India through its recently launched National Logistic Policy, which will be implemented on a massive scale in 2023.
As the Government of India enhances its focus on infrastructural development and bolsters Indian exports through various schemes, the sector includes certain challenges that, if addressed during the upcoming union budget, will be helpful in the long-term growth and holistic development of the sector.
They are listed below-
Reduction in the Steel Prices
Steel covers almost 30%-40% of the total construction cost of the warehouse, and since 2021, these prices are skyrocketing due to the global shortage and thus increasing procurement.
While several factors during and after the pandemic are at play, the rise in price has impacted the automation market of the warehouse, especially for the fixed solutions of the infrastructure, where steel accounts for up to 83% of the overall cost. Increasing the price of digital adoption by automation for extending the lead time of construction, the major hindrance for the Indian warehousing sector is the high prices of steel. If the reduction in steel duty for industrial warehouse construction can be considered, it can be a huge accelerator in developing smart and digitally equipped warehouses.
The aim of the ambitious Gati Shakti Plan is to create an ecosystem linking roads and railways from the hinterlands to the coastal Indian ports as a part of the National Logistics Policy. Development of around 2 lakh km of national highways is included in the plan. It is also crucial to note that the consolidation with the proposed initiatives of building dedicated logistics parks that are closer to ports an improved road networks will help in decongesting the existing warehousing hubs, reducing rentals, and unlocking better value for available warehousing land.
Multi-modal logistics parks have been another main focus of the Indian Government’s national logistics policy, and in 2021, the Government also announced an investment of USD 31.63 billion for designing and constructing the logistics park under a Public Private Partnership model. A focus on easier access to investment for industrial warehousing includes simpler processes for FDI, which would be appealing in the budget of 2023.
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