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Logistic bottlenecks affecting GDP By 2%: Assocham


The Associated chamber of Commerce & Industry of India (Assocham) has suggested introduction of an unified body to develop India’s Logistic Master Plan and integrated road-map for implementation with a view to avoid multiplicity of agencies, both at the Centre and States level, in exercising their powers to regulate the industry – according to a statement released by the chamber. In a note submitted to the government, the chamber has stated that currently the Ports, Shipping and Maritime Logistics (PSML) are highly fragmented and affecting the growth to the extent of 2% of the GDP on account of logistics and transportation bottlenecks.
Stressing the need for economic, speedy safe and seamless flow of goods, the chamber President, Dr. Swati Piramal said, "Logistics cost in India is over 13% of its GDP making India uncompetitive at the international markets due to under-developed trade and poor logistics of the country."
The chamber stated that about 90% of export-import cargo of the country, including that of its strategic cargoes is carried by foreign flag vessels. This puts the country in a precarious situation as bulk of our essential supplies like oil is carried on foreign flag vessels. This is a vulnerable position as there exists scope for leaving India’s strategic supplies at the risk of an abrupt stoppage in case of any eventuality.
Containerization of cargo requires efficient dry ports and multimodal transport for higher level of service at reduced costs. In India, at present, the prevalence of complicated, lengthy and cumbersome customs procedures are resulting in higher transaction costs. Additionally, practices like detention of goods trains at terminals due to various reasons such as rake formation, availability of locomotives, crew availability and train examination has been detrimental to foreign trade in India. The country is required to focus on this issue.
It has been observed that a variety of industries ranging from warehousing to power plants, steel mills, ship yards, chemical are being developed in the port back areas. Therefore, land acquisition and development of the available land have become most critical components of development of ports and shipping.
Referring the issue of distinction between major and non-major ports, the chamber note says “while the ports designated as the major ports come under the purview of Tariff Authority for Major Ports (TAMP), non major ports are not covered by TAMP. In view of the increased integration of constituents of PSML, a comprehensive policy needs to be formulated. Major policies drafted for the development of the sector are not only partial in coverage but also have got inconsistent objectives.
Globally there has been a growing trend in the port sector towards separation of port authority from port operator. This aspect need to be considered for meeting the demands of shipping and international trade. Port authority is increasingly getting focused on policy and regulatory role while a range of private port operators and port service providers are taking over a range of port related services. In contrast to the major ports, management of many of the minor ports like the ones developed on the Gujarat coast in India has taken care of this issue.
Assocham has further advocated addressing the host of taxes impending the growth of the industry. It says the number of services covered by service tax has gone up from 76 to 107, taking the effective service tax rate for the shipping business from 8 to 12.36%. The shipping companies have to pay service tax at the rate of 12.36% on various services rendered to them such as cargo handling, clearing and forwarding, general insurance, clearing and forwarding agent service, port services, repair and maintenance, steamer agents, storage and warehousing, survey, manpower recruitment and professional services.

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