Beyond roads and rails: logistics industry seeks policy reset in Union Budget

As the February 1 Union Budget approaches, India’s logistics sector—a ₹20 lakh-crore industry—is no longer asking only for higher allocations. Instead, it is pushing for a clear shift in policy focus: from infrastructure creation to operational execution.

After years of heavy investment in highways, railways and ports, industry bodies say the next phase must concentrate on making logistics systems faster, cheaper and more efficient. Below are the key fiscal and policy demands currently being flagged ahead of the Budget.

₹3 lakh-crore capex push

Industry associations, led by the Logistics Sector Skill Council (LSC), have urged the government to raise logistics-related capital expenditure to ₹3 lakh-crore. However, the emphasis is on targeted spending rather than fresh asset creation.

A major demand is faster development of multimodal logistics parks (MMLPs). Of the 35 planned nationwide, the industry wants at least five to become fully operational by 2027 to ease freight movement across road, rail and ports.

Another priority is last-mile connectivity. The sector wants part of the ₹1.5 lakh-crore interest-free loans to states to be earmarked specifically for rural and Tier-2 city logistics hubs, which remain key bottlenecks in supply chains.

GST and tax reforms

Taxation remains a central concern, with the industry calling for what it terms “GST 2.0” reforms.

One key demand is GST rationalisation. Currently, warehousing and freight forwarding attract an 18 percent GST. Industry players are seeking a reduced 12 percent rate for certified multimodal operators to ease working capital pressures.

Export bodies have also flagged the inverted duty structure, where import duties on raw materials used to make logistics equipment—such as specialised containers—are sometimes higher than duties on finished products. They argue this undermines the Make in India push in fleet and equipment manufacturing.

Another long-standing demand is bringing diesel and aviation turbine fuel under GST. If input tax credit is allowed on fuel, logistics firms estimate operating costs could fall by 5–7 percent.

Green freight transition

Sustainability has moved to the centre of Budget expectations. The industry is seeking a dedicated FAME-III scheme for trucks, with subsidies for electric and LNG-powered heavy vehicles, moving beyond the current focus on two-wheelers and buses.

There is also a call for green freight zones, with tax incentives and viability gap funding for zero-emission delivery corridors in dense urban markets such as Delhi-NCR and Mumbai.

Digital and deep-tech push

To meet the National Logistics Policy target of reducing logistics costs from 13–14 percent of GDP to 8 percent by 2030, the sector wants stronger support for technology adoption.

Key demands include R&D tax incentives for AI and blockchain applications in supply chains, especially to strengthen the Unified Logistics Interface Platform (ULIP).

The industry is also seeking Budget support for a national logistics single-window system—a unified portal to streamline regulatory approvals across central and state agencies.