The industrial and logistics sector is the backbone of the Indian economy, enabling and influencing other industries in the country. As the government aims to take the economy beyond $30 trillion by 2047, the logistics sector will play a crucial role. With the government expected to increase its capex for the upcoming fiscal, resources will be directed towards developing the transportation infrastructure. However, this alone won’t be enough to support the nation’s growth ambitions. A transformative shift in the strategies, policies and incentives of the warehousing industry is necessary to drive more efficiency in logistical operations. This will position India as a preferred destination for business and establish the country as a manufacturing hub.
Simplifying GST for Warehouse Development
The current GST credit system is limiting the construction of warehouses and causing a tax loss for developers. This results in higher costs passed on to businesses. We urge the government to allow input tax credits for capitalised expenses in warehouse construction and modernization. By doing so, logistics costs could significantly decrease as a percentage of GDP. The logistics sector also anticipates further simplification of land acquisition processes and subsidising of costs associated with warehouse and industrial park development.
Easing Land Acquisition for Warehouses under PPP Model
Land acquisition has been a persistent challenge for the development of industrial parks and warehouses in India. A Public-Private Partnership (PPP) model that favours PE-backed development of Grade A industrial and warehousing infrastructure in major cities could be a game-changer. This model could help overcome the land procurement challenges faced by institutional players like IndoSpace.
The development of such infrastructure will not just strengthen India’s logistical capabilities but also have greater spillover effects by facilitating more industrial investments and job creation, supporting the overall growth of the economy.
Granting Industry Status to Warehousing
The government is being urged to grant the warehousing sector the status of an industry and enable a host of benefits associated with the status. This move would bring stamp duty exemptions, electricity duty exemption, and other benefits that are applicable for industrial investments.
Moreover, the industry status would also help in addressing the restrictions on the height of warehouses that can be constructed and the Floor Area Ratio (FAR). Taller warehouses and a higher FAR would lead to the development of modern and multi-storey warehouses, enabling more efficient use of land.
Streamlined approval processes at both the state and central levels for warehouse and industrial park development would also be a significant benefit. A potential single-window system could ease project timelines, relieving the strains from a growing cost of capital.
Granting industry status to the warehousing sector would undoubtedly be a game-changer, and we hope that the government will consider this.
Incentivizing ESG-Centric Practices in Warehousing and Logistics
With the growing focus on sustainability and responsible practices, the logistics sector also expects the government to incentivize Environment, Social, and Governance (ESG)-centric practices in warehousing and logistics. This could include tax benefits or incentives for businesses that upgrade their warehouse facilities and implement environmentally friendly procedures.
The upcoming interim budget 2024 holds a lot of promise for not just the Indian warehousing and logistics industry, but for all businesses operating in India. And we appreciate the government’s recognition of India’s need to improve the ease of doing business through enhanced infrastructure. However, we also believe that it will take continued policy-driven support for Indian warehousing to reach the heights it can achieve.