Logistics Industry on the Rise in India

As a lead up to the launch of the National Logistics Policy of the country, a lot many changes have taken place in the logistics space in India. We will now be able to witness a pivotal transformation in terms of adoption of technology, system regulations and integration of multi-modal logistics. The country will also be able to see the next level of transitioning the use of renewable energy which will open new gateways to make an impact for the Indian logistics.

The CEOInsights magazine engages in a conversation with Yogesh Patel, CFO, Mahindra Logistics in order to know more as to how the national logistics policy will be facilitating the sector and what kind of changes will the country be able to see in the coming years.

Tell us a little about how the initiatives In current budget can help transform the Indian logistics sector as a whole.
From a perspective of National Logistics Policy which got unveiled a quarter back, the key objective of the policy has been to drive and make logistics efficient for the country as a whole and the key tenet is to improve efficiency by reengineering logistics, improving digitization and also promoting multimodal transport. We seen opportunity for reengineering the sector by creating new capacity and at the same time creating opportunities to utilize the created capacity. The second part is digitization.

It already has elements of it captured in Unified Logistics Interface Platform (ULIP) under the National Logistics Policy and it is part of that comprehensive logistics action plan as well. ULIP needs creation of the digital platform or infrastructure and effective adoption of it. Third element is to drive multi-modal transportation. One thing that we have seen commonly over last few years’ budget outlay is committed investment and outcomes on improving the road infrastructure where significant improvements have been seen and that has led to shift of logistics spending over roads. Road infrastructure has become good and efficient even compared to air or rail. The road infrastructure development needs to continue to improve as it should.

What are the biggest demands in the logistics industry from the govt?
The market drivers for logistics if you want to look at, we can start with manufacturing itself. The rise in demand what we are seeing right now from the automotive industry is definitely positive and improvement in manufacturing overall will drive the demand in the logistics industry itself and the government's perspective

indeed is to develop manufacturing environment in India. There have been improvements in international trade as well from both import and export perspectives. The whole indigenization of certain aspects of procurement which is being actively driven will create those additional avenues of production and hence the demand.

How is the budget giving competitive edge to the Indian logistics industry?
Logistics has to improve the competitiveness the Indian industry and better it in the global market. If you break down the cost of logistics which is said to be about 14 percent of the GDP, you will find that 2/3 of it goes towards transportation, 30 percent or so goes to inventory handling and balance towards administration. Inventory handling includes warehousing, working capital and shortages. All these are the areas for us to work on, to get towards same efficiency levels as global logistics scenario. We would surely need better warehousing infrastructure.

Logistics has to improve the competitiveness the Indian industry and better it in the global market

How will the budget boost warehousing and logistics?
It will in two or three areas. First is to promote the demand itself driving a higher growth in GDP, higher growth in manufacturing activities, higher consumption pattern in the country. All these areas drive a higher demand for logistics. Measures in the Budget towards these areas will help improve logistics performance itself. The second is the implementations of the national logistics policy itself. There are multiple tenets including the comprehensive logistics action plan and ULIP and even ONDC which is already being spearheaded. Last one is improving regulatory efficiency and adoption of technology which indeed has started from the implementation of GST itself and eventually, even the small operators in the industry will be able to manage compliances more easily. Today, the regulations have been simplified and the compliance methods also have to follow to make it easier for a very fragmented industry like ours which comprises of players of different sizes, small and big.

Can you tell us a little about the green initiatives that are being taken in the logistics industry?
Logistics industry overall is obviously one of the large contributors towards emission. So, lots of focus and opportunity remains to replenish the ecological damages which have occurred over the years. Hence, for transportation the adoption of alternate sustainable energies will be very necessary. In the warehousing side, it has relatively more evolved status where we find adoption of renewable energy more accessible.

Yogesh Patel, CFO, Mahindra Logistics
Yogesh is a finance professional with 20+ years of experience across Finance function including FP&A, Accounting & Controllership, Pricing & Commercial Structuring, Procurement, Contracting, Treasury & Fund Management, Auditing and Statutory Compliances.