 "P S S Prasad, president, Apollo Logisolutions")
Logistics sector is expected to reap the benefit of the government’s move to focus on investment in infrastructure (especially road and rail). While the current state of infrastructure in the country pose a big challenge, logistics solution providers see a window of opportunities opening up with the government’s effort to remove infrastructure bottlenecks and give a boost to manufacturing sector through Make in India campaign.
Logistics will have a greater role to play in the growth with initiatives such as Make in India, observes P S S Prasad, president, Apollo Logisolutions, a subsidiary of Apollo International Ltd (AIL). In addition, Prasad believes e-commerce to spur growth in the logistics sector, as these companies need to deliver products efficiently in the remotest corner of the country.
In this conversation with Rakesh Rao, P S S Prasad emphasises on importance of logistics to take the manufacturing growth story to the next level and new opportunities for logistics service providers in the country
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How is the current scenario in logistics industry - in terms of different transport modes (road, rail, air, and water), technology adoption, etc?
The state of infrastructure in the country is poor and a big challenge currently. So much so that growth is deterred. Road conditions are bad, rail has not been upgraded significantly in a long time and sea and inland waterways are underdeveloped still. The Government, if the budget is an indicator, is finally addressing these issues in a significant way.
However, different aspects of the logistics industry fall under different ministries and this creates inefficiencies as well. Constantly changing federal tax structures are a problem as well. An overarching body would be a big help.
Newer technologies are being adopted by players in the field but the impact is not as great as it should be given that the fundamental of infrastructure is weak. Over the longer term, investment will need to be made in automation while making the most of existing resources.
Manufacturing sector is still struggling to show high growth and exports are dwindling. How has this affected the logistics sector?
The logistics sector is naturally affected by the fact that the manufacturing sector is struggling. The dwindling of exports also affects those countries that operate outside of India like ours. However, India’s growth has a whole has been steady. The 7 percent growth is more than sufficient to fuel growth and development within the logistics sector.
According to one estimates, India spends around 14 percent of its GDP on logistics and transportation as compared to less than 8 percent spent by the other developing countries. What are the reasons for this?
As mentioned earlier, India’s logistics infrastructure is very poor. India is a vast country and given that there is not enough road, rail and air connectivity. Even the potential of the various waterways and seas are not being used to their limit. A lot of time, energy and resources are spent on doing the work of logistics in India that would otherwise be conserved if the infrastructure was up to the standard of some of the countries doing well in this arena.
How is the third party logistics (3PL) market in India?
In India, the concept of the third party logistics is still at a nascent stage. It looks to be developing in the recent years with analysts forecasting growth at a CAGR of 21.16 percent over the period of 2013-2018. Inevitably, the sector will move in a direction where there will be a greater role to play for third party logistics. It is possible that the introduction of GST will spur 3PL and be just 3PL needs to embed itself in the logistics space. Currently, the federated tax structure is a big deterrent for 3PL.
How will implementation of GST help the logistics sector in the county?
Implementation of the GST would increase productivity and raise efficiency levels in the logistics sector and the overall economy. Freight times can be cut by 30-40 percent and logistics costs can reduce by 20-30 percent. The manufacturing sector would receive a boost of about 3-4 percent - a significant value-add to the economy and more jobs would be created. The RBI Governor, Raghuram Rajan, threw his weight behind the bill saying the GST would 'unify the nation'.
What are the growth drivers and inhibitors for logistics market in India?
The quantum of investment from the private sector, government regulation, the investment in infrastructure by the government year on year are all factors that determine whether the logistics sector will grow or be inhibited. The logistics sector in India has been performing well in the last few years growing at a rate of 15 percent annum. However, issues like the delay in the implementation of GST, which would help the industry a lot inhibit the move towards progress.
How is boom in e-commerce helping logistics industry?
The e-commerce sector is estimated to be worth $ 220 billion in India by 2025. It is growing at an electric pace and if the growth of the nation is any indicator, wealth will be spread out across the country. The need for quality logistics for goods to be delivered to various locations speedily and a good manner will only increase. E-commerce needs the logistics section to function. Its growth to massive proportions will only spur growth in the logistics sector.
How will the move of this government to focus on infrastructure benefit the industry? What is your opinion about this year’s budget?
Infrastructure is the bedrock upon which the fate of the logistics industry rests. The focus on infrastructure can only bode well for the logistics sector. The special focus on roads is especially good since a vast majority of logistics work in India is done via roads. The second most used mode of transport is rail which is also going to be seeing some investment.
The general budget was good in our opinion given the focus on infrastructure. However, we would have liked more clarity on the GST given its importance. The sector as a whole would welcome its arrival.
Why is it critical to focus on ‘Move in India’ (ie, logistics) for ensuring the success of ‘Make in India’ initiative?
Manufacturing and logistics are intrinsically linked as sectors. The transport of goods is essential after production to complete the cycle of manufacturing. Given the ambition of Make in India initiative to make India a more of a global powerhouse when it comes to exports and reduce dependence on imports, more goods will be produced in the country than ever before.
These goods would be of all kinds and requiring different logistical capabilities to take them to their final required destination for use. This is true for T-shirts made somewhere in Maharashtra, or for a factory that will make parts for air force planes.
Without a strong logistics sector, the Make in India initiative will fall flat. The logistics sector will have the keep up with the pace of growth for the Make in India initiative to succeed. Investments in the sector, changes in regulation and more modernisation are necessary for ‘Move in India’ and ‘Make in India’ to succeed.
What are your plans for Apollo Logisolutions to tap the opportunities in the logistics sector?
Today we have portfolio of 3 container freight stations (CFSs) and pan-India presence for 3PL business. In next 2 years, we would like to create 3-4 more new CFSs and create an integration between our CFSs and 3PL business to provide seamless services to our existing customers and bring more customers who want one stop shop logistics solution.
In long term plan, we target to be ranked among top 5 logistics players in India and also to be listed on Indian bourses.
Any plans for expansion/diversification in near future? How is your international business panning out?
We have shortlisted 3-4 locations in India where we will be investing, building and operating new CFSs. These CFSs will be operational in next 18-24 months.
Joint venture with Fiege and acquisition of Clarion in year 2014 is a global strategy. Fiege is present in Europe and China, whereas Clarion is present in Middle East, Far East and Africa. With these tie ups we have created global network covering Europe, China, India, Middle East, Africa. In next few months, we will be focusing more on integration of these trade lanes and strategies to improve efficiency and effectiveness.
What is your outlook for Apollo LogiSolutions and Indian logistics industry?
The growth story of the logistics sector is something we firmly believe in. Currently, growth is happening at a phenomenal pace of about 15 percent. Given that the nation is expected to grow for the foreseeable future, the logistics sector has much scope for growth within it. Logistics will also have a greater role to play in the growth with initiatives such as Make in India and the booming e-commerce sector relying on this sector for their own growth.
Apollo Logisolutions as an organisation is well placed to capitalise on the growth story of the logistics sector. We expect to continue playing a leading role in the sector in the future. Our international partnerships with Fiege and Ferrari give us the opportunity to expand internationally. On the whole we are confident and optimistic.
