Exports logistics and ease of doing business - Issues in Gujarat state
Gujarat tops the ease of logistics survey
Gujarat has topped the perception based survey conducted by Deloitte on behalf of ministry of commerce. While I am not sure of the methodology and sample details, I am fairly sure that the survey is mostly accurate to the extent where the perception goes. I have been posted in Gujarat for sometime now and I am impressed by the amount of ease of logistics transactions in this state, when compared against other states I have worked with earlier.
While that is so, my day to day interaction with the exporters from the region has given me some insight about a few challenges which I am summarising sector-wise in this post. I am treating logistics issues from the point of view of exporters, as the goods move, from the factory gate to the port.
Overview of Gujarat exports and logistics
Gujarat stands second in terms of exports from India, after Maharashtra. A strong industry base developed over a significant period of time supports the exports from this state. Gujarat enjoys the benefit of proximity of good sea ports in Mundra, Kandla and Pipavav. Southern Gujarat is well connected to Mumbai port. The road, power and rail infrastructure is well developed in Gujarat and the advantage flows to the industry through faster movement of goods. Gujarat has well developed industrial sectors in the area of petroleum, gems and jewellery, chemicals, pharmaceuticals, textiles and engineering.
Process of exports
|Logistics and ease of doing business - steps|
Primarily, the process of exports of goods can be categorized into three distinct stages. Of this, the first and third stages shown above needs to be addressed through regulatory measures of ease of doing business. The second stage, that is the movement of goods from factory to ports, is the one that can be addressed through physical logistics infrastructure improvements. However, a holistic view of logistics cannot ignore the first and third stages of preparation of documents and clearances through regulatory agencies such as customs department.
Preparation of documents
|Logistics and ease of doing business - preparation of documents for exports|
Preparation of document is split into two parts: regulatory and commercial, as outlined above. Both activities are time consuming and involve direct and indirect costs in terms of various fees and consultancy charges. Any move to digitise and make these documents simpler adds to ease of doing business.
Movement of Goods from Factory to Port
This step involves effective logistics planning. In most cases, the movement from Factory to Port is in stages. The Factory to Airport is usually through road, whereas the journey from Factory to SeaPort or Landport is usually either through road, or through a combination of road and rail. The rail is usually used when the goods are cleared through an inland container depot (ICD) which is connected to ports through rail services. The rakes (a stack of 45/90 wagons) used for the purpose are usually owned by the ICD service provider, for example CONCOR, and the services of moving the rake are provided by the Indian Railways. The movement from factory to airport is usually on road.
The intermittent storage services are provided by private or public bonded warehouses. Most ICDs facilitate such storage of in-transit goods through in house warehouses.
Depending on the distance, mode of transport and status of availability of rakes, the journey time of goods from factory to port varies. Therefore, location decision of exporting unit becomes paramount if the industry desires to export.
The exporters have been unanimous that GST has cut down the transit time by around a day from earlier tax regime due to ease of movement across state borders.
Clearance of Goods through Customs
Custom House Agents (CHAs) usually carry out documentation activities related to clearance of goods at border through customs. Individual exporter are given the facility to file the documents on their own, but usually due to the prevailing practice, and to avoid unnecessary delays, expertise of CHAs is relied upon by even the most reputed firms. The border clearance, when done through CHAs, is fairly hassle free and doesn’t take more than 2 days time at the most in Gujarat.
I have personally seen the customs department in India evolving to become friendlier towards exporters over the last decade. The steps being undertaken under the guise of 'Trade facilitation agreement' that India has signed during 2016 at WTO is going to help in terms of standardisation of documentary requirements and taking the documentation process more and more online.
In the recent days, after introduction of GST, customs too has moved towards e-sealing procedures and has reposed greater faith in exporters in terms of self sealing of export containers. This is indeed a welcome move.
The only temporary setback I see after introduction of GST is the delay in giving refunds to the exporters in terms of their Input tax credit or their IGST refunds. This too shall be ironed out in due course.
General issues in logistics at Gujarat
Now, I shall summarise the general issues in logistics that I could collect as feedback based on my interactions with the Gujarat exporters.
- Availability of rakes at ICDs can be made more scientific through cooperation with the railways. The current situation is not amenable to good scheduling leading to unplanned departure of goods and uncertainty of assured timelines for movement of export cargo.
- An ICD at Rajkot and Morbi are needed for faster clearance of cargo.
- The road transport costs almost 2.5 times that of train transport. The reliance on road is due to lack of availability as well as poor predictability of rail transit time. A better supply of rail service, from various ICDs and export hubs to ports, would help in cutting down logistics costs in a significant way.
- The electronic interface of customs (ICEGate) is buggy and slow, leading to various delays and harassment while filing documents.
Sector specific issues in logistics at Gujarat
- Better cold chain facility in terms of reefer containers needed. End to end temperature control, from factory to port, for pharma products is critical.
- Due to lack of proper facilities for handling temperature sensitive pharma products, Gujarat pharma industry prefers to move their cargo through road to Mumbai for air or sea shipments.
- The availability, as well as handling facilities for reefer containers at Ahmedabad airport is limited.
- Ahmedabad airport doesn’t figure on most international airlines catering to pharma markets.
- The rail service catering from ICD Ahmedabad to Mundra/Mumbai do not have facility to move reefer containers.
- Road transit to Bangladesh border and customs clearances at border (Petropole) takes a time of around a month in total. Out of this, around 15 days is consumed due to road congestion at the border, in the state of West Bengal - a poorly ranked state in the above survey - and delay also arising out of poor infrastructure and inefficiency of clearance at Indian and Bangladesh customs. This in comparison to China, which is able to supply goods to Bangladesh within 7 days, puts Indian exporters to Bangladesh at a considerable disadvantage.
- Given the quantum of exports, a dedicated rake may be provided from Gujarat to Bangladesh border which is not available as of now.
- Better availability of rakes at ICD Ahmedabad would help cut down time of travel of export cargo from Ahmedabad to Mundra/JNPT.
Gem and Jewellery Sector (mainly Diamond exports sector)
- Under connected international airport of Ahmedabad. Exporters have to rely on Delhi and Mumbai international airports for diamond exports to major destinations.
- Customs clearance of gems and jewellery requires specially trained officers to be posted in adequate numbers for faster assessment of export cargo and subsequent clearances. This is not so in airports of Gujarat.