‘In GST regime, trucks covering 10-15% more distance in a day’
After the implementation of GST and e-way Bill, trucks have been able to cover 10-15 per cent more distance in a day than what they used to do in the pre-GST era, helping in reduce cost of logistics, said Mahindra Logistics, which saw a demand slowdown for the quarter-ended March – both sequentially and annually.
Mahindra Logistics is a ₹3,851-crore firm. Its customers consists of automobile, fast-moving consumer goods and consumer durables firms.
“Trucks moving 300-350 km a day in the pre-GST days are now moving 400-410 km. Faster turning wheels have led to a drop in cost of logistics,” Pirojshaw Sarkari, CEO, Mahindra Logistics, told BusinessLine. The logistics firm, one of the few listed companies in the sector, has witnessed a slowdown in the passenger vehicle segment and flattening of FMCG and consumer durable demand in the quarter-ended March.
But the slowdown in demand has not hit Mahindra Logistics in a big way as the company saw growth as the unorganised logistics sector is now becoming organised. GST has panned out the way the firm had expected. “The consumer-facing companies — FMCG, consumer-durables — which were staying away from third party logistics and handled transportation and warehouse internally or through clearing and freight agents, have now started having large distribution centres. They are now outsourcing warehousing and last mile transportation to third party logistics players,” said Sarkari.
Sub-assembling auto parts
Post-GST implementation, the company sees new opportunities in areas of sub-assembly of automobile parts. This is an international trend that will now catch up in India.
“Earlier, most of the automobile companies did the sub-assembly — which involved putting together two-three parts to form say, an engine — within the factory because the Excise Law did not permit sub-assembly outside of factory. But now, with Excise gone and GST coming in, auto-makers have a choice to store their parts. Cost of manufacturing or sub-assembly is higher for a manufacturer than a for logistics player,” according to Sarkari.