No - 3 Steroids into Indian Logistics:

No - 3

Steroids into Indian Logistics:

Reliance and CCD are the new biggies sniffing at our club of Indian Logistics. In fact a whole lot of private equity and debt instruments have entered into the sector. There is immense potential, with the Indian growth story adding more spice into the kitty. Capital infusion is most welcome to create more capacity and remove institutional road-blocks. And they are responsible in slackening up the tight & rigid red-tapes of administration & policies. 

The flip side is the creative destruction of the redundant businesses in a free market environment. The most old fashioned and lethargic companies have to gasp on their knees. Our Nehruvian past of excessive state controls and licenses have created such old fashioned & lethargic mammoths. And they are most visible for their gigantic sizes and messy visceral. This visibility attracts easy capital. Many of the new investors would be fooled by such entities. They would pour in the money and would be disappointed. They would find their returns on a far away horizon shrinking in size with time.

Capital pours in and fills up the most visible voids. The voids are not necessarily the best pockets of growth. Some of them could be potential black holes. However, that's a learning curve for the investors in a new sector such as shipping. Huge market size and a growth projection based on GDP is too chocolaty. The realities on the grounds are different. The archaic taxations, restrictive policies, the bribe-sucking mechanisms of customs, the rigidity of old & large players including monopolistic PSUs, & land grabbing by the big corporates & politicians in connivance with the corrupt politicians & bureaucrats  in the name of SEZ etc render this logistics industry fragmented and intrinsically anti-business. 

Big time capital infusion, would pave the way of bulldozing away repressive & exploitative policies, such as holding up and delaying shipments by customs to extract bribes, insensitive terminal tariffs, cartelizing of transporters, CHAs, shipping line agents, poor roads to terminals, unplanned warehouses and storage areas, meaningless cabotage rules, counter-productive service taxes on exports, and so on.

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Brgds

Capt Rath

Econship Marine

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