The Government recognizing the importance of logistics infrastructure has built-in in 11th Five Year Plan (2007-12) estimates, the need to create additional warehousing space of 35 million tonnes. The plan is to establish 50 cold chains, set up of 30 mega food parks, and revamp the comprehensive cold chain infrastructure scheme. Out of 30 mega food parks, so far only 5 have obtained clearances.

The Warehousing Development & Regulation Act, 2007, was meant to encourage firms to set up warehousing facilities. But inability to sort out delays in land acquisitions is keeping back modern warehouses. Clearly, developing logistics support will be a priority for the Government. A great push in development of this sector, could be by grant of ‘infrastructure status’ to logistics sector. Some benefits that could be conferred are:

•           100% tax holiday to food processing and cold chain units for a period of 10 years under section 80IA of Income Tax Act rather than section 80IB, where the deduction is restricted to 100% for first 5 years and 25% for balance 5 years;

•           Exemption of service tax on services rendered by warehouse service providers; concessional custom duty on import of capital goods and exemption from levy of excise duty / VAT on capital goods purchased locally;

•           100% FDI is allowed in FTWZ (effective from 2004) to create necessary trade related infrastructure to facilitate export-import of goods and services. On similar lines, 100% FDI should be also allowed in construction and operating of warehouses / cold chain storage facilities;

•           At present, warehouse and cold chain service providers are not allowed to raise External Commercial Borrowings (ECB’s) from abroad. On grant of infrastructure status, corporates will be able to obtain ECB under automatic route from abroad;

•           Remove hurdles in land acquisition and grant concessions in stamp duty rates;

•           Availability of cheaper finance for building logistics infrastructure

Grant of infrastructure status would catalyse the logistics sector and will go a long way in building a robust logistics infrastructure, leading to reduction in logistics cost, would not only reduce wastage but also spur growth, generate jobs and create incomes in semi-rural areas and minimize the disruptions in supply-chain management. This would encourage set up of central warehouses and perishable distribution centres. It is also likely to help create mega logistics hubs (like, Nagpur- a key national air cargo hub), with strategic location on the Golden Quadrilateral, North / South / East / West Highway, relevant port, airport and rail head locations.

In order to truly exploit the potential of logistics sector, it is now imperative for Government to push for reforms.