Focus on Impact of GST on Logistics Sector

Focus on Impact of GST on Logistics Sector

Jasjit SethiBy Jasjit Sethi August 30, 2017

An exclusive interview of our CEO, TCI Supply Chain Solution Mr. Jasjit Sethi with Motor India Magazine.


Q 1. How was FY16 for TCIL? What were the major achievements and targets you had achieved during the fiscal? How has FY17 started for you and what are your expectations from the rest of the year?

Ans: The year 2016-17, TCI Group witnessed a decent growth with revenues of over 3,000 crores.

The overall improvement in business environment and our continued focus on value added services have helped us achieve our revenue and margin growth this year. With changing consumption trends, we have achieved traction in building additional ecommerce fulfilment centers and expand other niche slogistics sectors.

We have deployed one more high tonnage ship this year on the West coast to strengthen our national multimodal network.

All our business verticals are expecting higher growth in revenue and margins in the coming year with our focus in the areas of providing integrated logistics and warehousing solutions with an advent of GST.

Q 2. The CV industry had quite a challenging start to FY17 with the move from BS-III to BS-IV emission norms. As one of the leading logistics solutions firm in the country, what do you think the BS-IV move has done to the market and what would its implications be for the rest of the fiscal?

Ans: With the sudden announcement by Supreme Court regarding the sale of vehicles compliant with BS-IV norms only, many auto makers are in dismay as they are left with inventory of BS-III vehicles.

While the switchover from BS III to BS IV emission norms may have caused a one-time material impact on the auto industry; however, in the long run it will depend on how good and stable the incoming technology is and whether it can yield lower fuel and operating costs. As this change is thrust upon the OEM and not originating from them, we fear that readiness for new technology in the entire value chain will ensure lower TCO (Total cost of Ownership) and may be compromised in the short run.

It would auger well for the OEM’s and the industry if they were to prepare for BS VI and keep in mind that India will remain a cost sensitive market hence Cost (TCO) Kaizen is key for everyone.

Q 3. The July 1st GST roll out is the next big thing for the Indian market. What impact do you see it have on the logistics sector in the short term & also the long term?

Ans: With the introduction of GST, the present vertical structure of VAT on Goods and Service Tax on Services will merge into one consolidated GST. However there is a split between central and State so there is a horizontal split in GST between GST for purposes of Input tax credit

For the logistics sector, various measure like Way Bill, Transit Pass, Multi locational offices are additional challenges we have to overcome, besides the Supplier and customer integration.

GST ON LOGISTICS SECTOR In terms of the Network design, the 5 main factors affecting Supply Chain as depicted in the TCISCS Supply Chain 5 forces Model would remain, as “Taxation” which would take the hue of Input tax that is available and availed.

Contrary to many schools of thought, while the network would be more Logistically-Right than taxation friendly, the number of warehouses would not really come down in many regions because of closeness to customer is a key factor. The major impact is seen in areas like NCR (Delhi- Haryana- UP-Rajasthan); Bangalore (KTK, AP, TN) and Kolkata (WB- OR- JH- NE)

However, in the short run, the transition of GST will not be simple. It will require some time for the entire supply chain to settle down into a rhythm.

Q 4. Driver challenge continues to be a major challenge for the transport sector. Are we doing enough to resolve the issue? What is the way forward?

Ans: Throughout the past decade, the trucking industry has struggled with a shortage of truck drivers. This challenge has arisen mainly due to low driver wage. Also the trucking industry is becoming more heavily regulated than ever before.  Many drivers are distressed by the electronic log system and the ever changing Hours of Service regulations, and are leaving the industry.

To tackle this challenge, TCIL has incorporated few internal policies in favour of truck drivers. We are offering better wage & larger signing bonuses to retain the drivers. Also, sufficient training are being provided at TCIL to our drivers to comply with the dynamic regulations of the industry.

Another major challenge for driver shortage is that currently the industry is employing middle aged people as drivers. As older truck drivers are ageing & retiring, the issue of driver challenge is enhanced. Hence, we are employing millennial & guiding them with proper training.

Maintaining physical fitness is an important aspect for the drivers. We at TCIL are motivating them for regular exercise & also conduct such sessions time to time. We also conduct social activities for the drivers in order to develop a personal connection & long term relationship with them.

 

Jasjit Sethi
Jasjit SethiMr. Jasjit heads TCI Supply Chain Solutions, which is part of Transport Corporation of India Group.
Mr. Jasjit Sethi, CEO, TCI SCS, is a well-known expert in the logistics & SCM industry and an alumni of Harvard Business School.

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