There is a need for investment into the logistics sector, infrastructure as well as technology, and specifically into the integration of the different modes of transport, ensuring seamless transfer of cargo and goods across air, sea, road, railway and inland waterway modes

The transportation and logistics sectors are vital engines of the Indian economy. The recent and ongoing pandemic has highlighted the importance of these sectors in terms of economic resilience, requiring the need to provide impetus and support in order to bridge gaps. It also showcased the need to further enhance and develop these sectors to ensure overall economic recovery and growth and help facilitate the change to a more green and sustainable economy. The Union Budget must, therefore, across sectors, focus on economic growth and sustainability.

India has made significant advances with regard to increasing domestic sales and registrations of electric vehicles. According to industry estimates, electric vehicle sales in India rose to 50,866 units in December 2021, representing a 240 per cent increase from the sales recorded in December 2020. However, the large majority of these sales – as much as 90 per cent - has been confined to electric two-wheelers and passenger three-wheelers. The market for electric passenger four-wheel vehicles remains elusive. One of the most significant contributors to this imbalance is that there are only 1,028 electric vehicle charging points in India to service an estimated 947,876 electric vehicles in the country.

Whilst the recent EV policy supports the sector by addressing charging point operators and providing a better policy framework and subsidies and tax breaks, the Budget could indicate further adoption of electric vehicles through f.inst. the reduction of GST on various categories of electric vehicles.

While first steps have been undertaken to encourage the development of green hydrogen for the transportation sector, particularly through the National Hydrogen Mission, the Union Budget 2022-23 can act as a springboard for the sector by incentivising greater adoption through a variety of tools such as green hydrogen purchase obligations, green hydrogen blending targets, PPP engagements for ‘hydrogen highways’ and R&D investments in this sector.

Within the aviation sector, there is an urgent need to address challenges. With continued depressed domestic passenger numbers and rising aviation turbine fuel (ATF) prices, the Union Budget could consider the inclusion of ATF under the GST framework.

There has been significant work undertaken in the use of Sustainable Aviation Fuel (SAF) by aircraft operators in India. The mandatory obligation of adding bioethanol to standard aviation fuel can go a long way in ensuring reduced emissions and sustainability. To ensure quicker adoption of SAF, the Budget could incentivise R&D investments, consider increasing domestic production by public sector undertakings in association with domestic and foreign manufacturers, as well as implement policies to address the current higher cost related to SAF.

Reports to substantially increase highway budgets by 30 per cent to construct an estimated 50km of highways per day in 2022 in the Union Budget, can also substantially increase the capacity and efficiency in the freight sector, by improving supply chains and connectivity, and potentially attracting more fuel-efficient trucks to the higher quality roads.

There is a need for investment into the logistics sector, infrastructure as well as technology, and specifically into the integration of the different modes of transport, ensuring seamless transfer of cargo and goods across air, sea, road, railway and inland waterway modes. This will have a variety of benefits. It will shift much movement of cargo from road to other modes of transport, making for efficient and more sustainable supply chains, it will increase resilience by increasing transport options for cargo owners and transport companies, and it will help integrate India further into global supply chains, attracting foreign investment to the country.

The National Logistics Policy, and the Warehousing Policy, both currently being designed, addresses some of these issues, and could significantly enhance the productivity and efficiency of the sector, thereby lowering the cost of logistics. The Budget is expected to see incentives for the promotion of domestic manufacturing and continued support schemes to businesses due to the effects of the pandemic, there is however a strong need to ensure appropriate support to the logistics and multimodal transportation sectors, that can guarantee expedited connectivity and more efficient exports.

The current Budget has an opportunity to implement policies and schemes to support building resilience, recover from the pandemic and grow as an economy, and to do so with sustainability at the forefront. A Budget with such a focus will also pave the way for deeper partnerships with other countries, centred around investment and transfer of green technologies and solutions.

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