Reducing Cost: Are We Looking At The Wrong Tree?

Industry leaders on the panel and audience brainstormed to figure out various elements that add to the cost and can reduce cost right from terminal operations to first/last mile connectivity

The first session examined under the microscope each and every aspect of inland logistics that either adds to the cost or can reduce cost. “One of the ways for reducing cost is by slashing taxes on logistics,” suggested Tarlochan Singh Ahluwalia, President, Northern India Shipper Association. For example, If 26 metric tonnes of rice is sent stuffed in a container through ICD from north India to Mundra Port the cost is ₹73000. The same consignment when sent in a truck costs about 60 per cent. Sending by road the exporter saves on THC, 400 litres of fuel is consumed on the journey which attracts ₹10,000 in taxes on fuel. The logistics cost via road from factory to the port is ₹30,000, which includes tax on fuel and toll tax, the later is also ₹10,000. If the government gives refund of these two taxes then costs can be reduced.

“The government says taxes cannot be exported and thus we are getting the IGST refund. If the government wants to refund the taxes, then why not refund the taxes on fuel as they are on the higher side, suggested Ahluwalia. Warehousing charges for stuffing and de-stuffing of goods also come upto ₹10,000 which can be avoided if the government allows a separate area for DPE consignments stuffing and de-stuffing. If the above mentioned charges are removed then cost can come down by 50 per cent.

Ahluwalia added, to cut cost we can focus on logistics because it doesn’t add any value into the product directly. The freight forwarders and CHAs should look at the logistics chain and figure out ways to cut cost or add value to products. For example, from North India basmati rice is exported through Mundra Port. There are 2 options for connecting to the port – one is CONCOR that operates on a profit of 16.7 per cent, while truck operators work on 2 per cent profit. If all Navratna’s like CONCOR aim at such high profit then cutting cost will be difficult.