Patel Integrated Logistics, which started out operations in Bhuj, Gujarat, is one of the large companies in the Indian logistics segment. Areef Patel, Vice-Chairman, spoke to BusinessLine on a host of issues ranging from new growth avenues being opened by e-commerce and the impact of the goods and services tax (GST) on business. Edited Excerpts:

How will the GST roll-out and increased allocation for infrastructure in the budget impact the logistics sector?

The GST plan and the hike in infrastructure spending are the two things that can impact the logistics sector in the long run, though there were no sops in the budget.

GST will take away some bottlenecks, and as infrastructure improves, it would reflect on the overall efficiency of logistics companies.

Both these factors would make the movement of cargo smoother, faster and more effective, which should surely move the economy towards a better direction. Besides, the GST can also give an impetus to the growth of warehousing and supply chain management.

In India, the average truck speed is 30-40 km, while it is 60-80 km in China. This sums up the plight of our roads and infrastructure.

Apart from infrastructure, how can the government support the logistics industry?

There are no special perks for the sector, but there are many demands such as giving industry status to the sector, creating free zones for warehouses, sops for improving the skills of the workforce, promotion of PPP, special support under Make in India or clarity on taxes.

I feel a regulatory body can unite the policy stakeholders now spread under different ministries.

This integration will ease doing business in the sector by easing regulations.

How has e-commerce given a spurt to logistics companies?

E-commerce is perhaps the best gift that the depressed logistics sector could ask for. Estimates suggest that by 2020, e-tailing will capture about 20 percent share.

There is no e-tailing without delivery, which means logistics is the most crucial part of it. So, this alone can indicate the growth potential in store for the logistic companies.

The biggest challenge for e-commerce firms in India is the logistics part and some biggies may invest to set up own arms to a certain extent. But in the days to come, the sector will also see entry of small and medium online sellers.

Besides, India will also witness emergence of aggregators and technology integrators in the e-tailing space, and they cannot run without third party logistics companies.

Factors like time, last mile delivery, efficiency and technology will decide who will get business among the logistics players. This will in turn prompt logistics firms to equip themselves for the task. Though e-commerce may take a few years to stabilise or to take a clear direction, the sector is growing rapidly. We see an expansion of margin, better margins, and better bottom lines.

Can you quantify that?

We have been focusing on the ecommerce business over the past 6-12 months. If you could see our financials, we have witnessed a strong growth in our revenues and that’s partly from the e-commerce business.

At the start, it was close to 5 per cent. This will remain a key focus in the days to come. Amazon has tied up with us as a preferred vendor and we also look to tie up with two-three mid-sized companies. We have set up a new exclusive e-commerce division, though a small team now, to cater to e-commerce operations.

We are expanding our presence across the country with more offices. In the next two-three years, ecommerce will contribute a large pie of the revenues earned by several logistic companies.

In our own business, we expect it to be somewhere around 25-30 per cent that would come with better margins.

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