Warehousing will benefit from GST implementation

Procam Logistics

Procam Logistics is an emerging integrated project logistics management company and a preferred logistics partner to some of the world’s largest companies in the energy, steel, power, oil & gas, infrastructure, automotive and rail sectors.

Nilesh Sinha

Nilesh Sinha

Nilesh Sinha, Founder and Director – Procam Group told Sandeep Menezes that the project cargo segment would be the initial beneficiary of government’s ambitious ‘Make in India’ initiative.

Excerpts from the interview:

What is Procam’s future business strategy? Tell us about the current status of the Caparo-Procam JV that intended to develop warehousing facilities in India?

Procam Group is an asset owned project cargo transportation company and will continue to focus on sectors that demand incremental value at all levels during a supply chain process. We have built a deep domain expertise in handling scale infrastructure projects in energy, automotive, defense and railway sectors by providing specialized heavy equipment haulage by multi mode transportation.

The inception of Caparo Procam Infra is a very strategic initiative in context of overall supply chain process in market where we operate. The JV started its operation in Automotive and Rural Infrastructural segment initially and is now preparing itself to leverage the market opportunity post GST implementation. The location advantage, skilled manpower and in-house WMS software are biggest differentiator of Caparo Procam Infra.

Indian transportation industry is highly fragmented and poses several challenges with 80% of operators owning less than five trucks and most of them being lane specific. Comment.

Indian transportation operators are flexible and addressing the needs of their clients as an extended partner. The low entry barrier and lack of standardization across the value chain keeps this segment as an unorganized sector but the transportation services provider for specific industry segment are organized and based on the cargo handling requirement. They are organized as sub-segment eg car carrier, cement transportation carrier, hydraulic trailer operators etc. The amendments in Motor Vehicle Act, which is expected to table into parliament this session will bring more transparency and help in getting this sector further organized.

The government and private sector is investing heavily into infrastructure development projects and these investments are resulting in increased demand for project logistics. Comment.

We are bullish about government’s seriousness towards building large scale infrastructure and to be part of this growth story we are enhancing our capacity to meet the expected demand. Recently Ministry of Surface Transport and Highways launched online approval of OD/OWC cargo movement on national highways and providing instant online approval of cargo up to HT3 category i.e. 169 MT GVW which was a long pending demand of all stakeholders in heavy haulage segment. The online data generated through this process will help government to formulate future planning inline with actual requirement of industry.

What is the current size of project logistics industry globally? Tell us about the estimated future growth rate of the industry?

As per 2012 Drewry report, sea borne project cargo market size is approx $120 billion and As per Frost & Sullivan 2014 report, India Project cargo market size is $14.18 billion and expected to grow by 20.5 per cent CAGR. These numbers are inclusive of many factors and segments therefore may not represent market size from specific service provider’s perspective. But basic key drivers like industry specific growth thrust by government and industry makes this segment promising.

With the government’s focus on its ‘Make in India’ campaign, there will be increased requirement for industrial projects transportation. Comment.

The project cargo segment would be the initial beneficiary of government’s ambitious “Make in India” initiative as it will create need for movement of capital goods, plant equipments and machinery to set-up plant and infrastructure. The investment in enabling Make In India initiative in infrastructure, power, roads etc will create more opportunity for project cargo transport operators.

India’s warehousing infrastructure both qualitatively and quantitatively is highly inadequate. Going forward, how do you foresee the scenario evolving?

The average size of warehouse in India is approx 10,000 square feet and decision of location of warehouse is made on tax consideration. Both reasons make cost of qualitative facility very high. Going forward GST Implementation, Make In India drive and Digital India drive will provide thrust to warehouse industry. This will happen by removing tax optimization through small warehouses, storage requirement of raw material & finished goods due to investment in new plants and increase in warehouse efficiency.

GST is expected to emerge as a game changer for the logistics and supply chain industry. Comment.

Warehouse sector is expected to benefit from the proposed implementation of the goods and service tax (GST). A complicated tax regime coupled with poor infrastructure has led to high logistics costs in India at around 14 per cent of the total value of goods against 7-8 per cent in developed countries. GST, when implemented, will free the decisions on warehousing and distribution from tax considerations, which, henceforth, would be based purely upon operational and logistics efficiency. This will lead to development of various logistics hubs and overall improved efficiency in the sector.

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