GST & E-Way Bills will offer a boost to India’s truck industry

It’s fair to say that without an effective and efficient road-freight logistics industry, our country will never be able to reach its fullest potential

The past one year in India, has been one of the most turbulent that I have seen in my business career to date. The introduction of demonetisation and the implementation of the GST, has delivered two massive shocks to the Indian economy in quick succession.

Along with many of my fellow Indians, I too was stunned when I read the Q1 GDP print of 5.7 percent earlier this week.

Our once “fastest growing major economy in the world” has had the wind taken out of its sails.

Since then I have been reading the many suggestions offered by politicians and business pundits, on how India can once again build up economic momentum.

Among the many suggestions that have been voiced, I did not find a single one which focused specifically on the logistics industry.

The fact is that logistics, and specifically, road-freight is the life blood upon which India’s economy is supported.

Of all the methods of transporting products across India, road-freight is the most popular, making up approximately 63 percent of all logistics services offered in the country.

So it’s fair to say that without an effective and efficient road-freight logistics industry, our country will never be able to reach its fullest potential.

With this in mind, I think it highly logical to focus on strategies with which to create improvements within this key industry, as part of a wider program with which to once again build the winds of progress into India’s becalmed sails.

One such suggestion lies in the introduction of the GST, and corresponding E-Way Bills…

E-Way Bills are an electronic way bill, for the transportation of goods in India, under the GST framework.

They are generated online, via the GSTN common portal and provide a one-time, unique ID, specific to each delivery of goods.

At this very moment across India, there are thousands of road-freight logistics companies experiencing bottle necks in their ability to invoice and receive payment for road-freight logistics services they provide, due to an inefficiency that exists in administering Proof of Delivery (“POD”) to their clients.

Before a logistics company can invoice their client for transporting their goods from point A to B, they must first submit a POD, which is in the form of a signed declaration of receipt by the client, which remains with the truck driver until they are able to return this small document to their respective head offices.

In some cases, truck drivers are on the road for days at a time, and often only report back to their office once a week.

Thus one can begin to appreciate the delays in payments that road-freight logistics companies are subjected to, due to these little PODs.

At present an estimated USD 30 billion (which is the average 3 month cycle), is locked up as credit across the country, due to the ongoing delays in PODs.

It’s very restrictive, however it doesn’t have to remain this way…

As a huge fan of Prime Minister Modi’s push to digitise India, I suggest the way forward in this case, is to mandate the closure of an E-Way Bill via the online GSTN portal, following the successful completion of a logistics delivery.

The closed E-Way Bill (by the client) will then instantly be able to serve as the POD, and invoicing can happen within minutes of the delivery, as opposed to days, or even weeks.

The domino effect of this simple change will see the cash flow of thousands of road-freight logistics companies, pan-India drastically improve, and with it the livelihoods of the crores of Indians employed within this large industry.

It’s a huge “win, win” for all!

The benefits of introducing e-PODs are as follows:

1) Create a positive change in the lives of those employed in the Trucking Industry:

The industry employs over 10 million fellow Indians. Across our country this would no doubt lead to a significant boost in commerce, and thus have a positive flow-on effect to our economy.

2) Positive impact on India’s banking system:

The resulting efficiency in cash-flows would mean that the industry (Shippers) would have to resort to more formal means of credit for funds, and hence create fresh demand for lending from Banks and financial institutions.

3) A total control on e-way bills:

With the introduction of e-PODs, a 100 percent control on the assignment of vehicles with e-way bills would be established, thus eliminating the potential chances of assigning additional e-way bills to a truck which is already in transit with an open e-way bill.

4) 100 percent digital trucking across India to support “DIGITAL INDIA”: Create an end-to-end online process, the highly unorganized trucking industry would be transformed into 100% digital as per the below;

-100 percent e-Way Bills.

-100 percent e-PODs.

-100 percent e-Payments.

5) Lower Freights : With improved cash flows, truckers will be able to offer better freight rates to industry (shippers).

For the vast majority of people out there, it may still be quite difficult to appreciate how this small change will added to improving India’s economic momentum, so I will attempt to provide some perspective on this subject. The Associated Chambers of Commerce and Industry of India estimates the Indian road-freight logistics market to be worth a staggering USD 147 billion this financial year. This makes it significantly larger in value than the GDP of many entire countries in the world today. Think about that for a minute…

Add to this, that it’s growing at a CAGR of 15 percent, and one can now begin to understand why I feel, that this one change in mandating the closure of E-Way Bills online to create e-POD’s, will help India to grow…

In an effort to facilitate the introduction of this idea, I have sent this suggestion in the form of a letter to The Prime Minister, The Finance Minister, The Ministry of Road Transport and Highways, and The Commissioner of GST.

As Prime Minister Modi continues to move India towards a digital future, many industries may take considerable time to reach this ambition. However the suggestions that are presented in this article, will at least lead the logistics industry to become 100 percent digital in a short amount of time.