Jasjit Singh Sethi
chief executive officer,
TCI Supply Chain Solutions
Last month Namaste spoke with Sethi, CEO of Delhi-based TCI Supply Chain Solutions, a logistics institution in India. In part two of our talk with Sethi, we discuss issues of value added taxes (VAT), the government's role in facilitating logistics development and what his ideal supply chain world would include.
Part one of Sethi Q&A
Namaste: How does VAT at the state level influence logistics decisions for shippers?
Sethi: VAT, by design, is to take care of the cascading effect of taxes. However the VAT at present is more of a uniformity of tax rates in different states across most categories. For example, fuel and liquor are not under VAT purview. At present it allows for input tax credit (ITC) only for the same state. Thus for (business to business) products, the benefit is only if the supplier and recipient is in the same state. This is slated to change to a nationwide ITC once the promised goods and services tax regime comes in.
Namaste: Is the national government doing a good enough job in recognizing the importance logistics plays in the development of the Indian economy? And how could the government make things easier for shippers and the logistics companies that support them?
Sethi: The understanding of logistics and the synergy between the various ministries has been woefully low. As a result key infrastructure is becoming bottlenecked and the growth is occurring in islands. The planning is done in short-term plans of five years and until now a strategy paper on this is missing. The Ministry of Surface Transport, Ministry of Railways and Ministry of Civil Aviation are the key players, along with various ports and coastal shipping (authorities), while inland waterways is considered an insignificant part.
  There is no industry status given to logistics, hence you see warehouses coming up on converted farmland. Even modern industrial zones do not have logistics parks. In the last one year, some initiatives have been taken up by Yojana Bhawan (Planning Commission) and various committees had been set up for different facets of logistics. These reports have been submitted and we await the next steps.
  The exception to logistics parks is the (Multimodal International Hub Airport at Nagpur, or MIHAN), but we need much more, especially in critical zones like (the Delhi National Capital Region), Mumbai-Pune, Bangalore, Chennai, Hyderabad, Kolkotta, along with tier one cities and industrial belts. There is thus an urgent need to recognize this sector as an industry which would open the doors for structured development.
Namaste: If you had a wish list for improving the logistics industry in India, outside of better infrastructure, what would it include?
Sethi: Outside of better infrastructure, the main concern area is policy and procedures. The committees I mentioned before worked on these aspects also. These include the magnitude of paperwork when passing through state borders, the various agencies we need to handle and the excessive taxation on the sector by way of (road) toll taxes, and extra levies on fuel. India subsidizes the fuel after taxing it to the hilt. On a pure dollar-per-barrel price to actual retail price, we are amongst the highest in the world. The legislation with regard to the Motor Vehicle Act needs to take into cognizance the developed countries as the policy is not favorable to larger vehicles, which result in more congestion (as more small vehicles hit the roads).
Namaste: What are some areas of logistics in India that aren’t getting enough attention, either from shippers, the government or foreign logistics companies looking to invest in India?
Sethi: The major part is on the government initiative front, as the larger private players need a roadmap and a climate to invest. Clearly one area is land availability and promotion of logistics parks and freight villages. These need to be multimodal — there are none at present — as a major reason for low road-rail interchange is the lack of parallel facilities for both, along with warehouses and truck terminals. Another is the development of ports along the western coastline (along the eastern coastline, such an initiative has already begun) as congestion gives way to higher logistics costs. The ports themselves need to be more competitive and attractive to shipping lines.