India Recognises Logistics As Sub-Sector Of Infrastructure
Logistics’ recognition as infrastructure sub-sector will reduce cost of capital for the sector.
The government has granted the logistics sector infrastructure status, allowing companies to borrow larger sums for a longer period.
The government is pushing for integrated logistics sector development as “logistics cost in India is very high compared to developed countries,” according to a statement issued by the Ministry of Finance. “Development of logistics would give a boost to both domestic and external demand, thereby encouraging manufacturing and job creation,” the statement added.
It will enable the Logistics Sector to avail infrastructure lending at easier terms with enhanced limits, access to larger amounts of funds as External Commercial Borrowings.Ministry of Finance Statement
Infrastructure status for logistics companies will also allow them to access longer tenor funds from insurance companies and pension funds and make them eligible to borrow from state-owned financier India Infrastructure Financing Company Ltd.
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Cost of logistics in India is around 13 percent of its gross domestic product, according to Pirojshaw Sarkari, chief executive of Mahindra Logistics. This is higher than the 9 percent in U.S. and 8 percent in Germany, he said in an emailed statement.
The change in status will "reduce the cost of capital in transportation and warehousing, thereby reducing cost of logistics," he added.