Global retail giants await tax reforms before India foray
Aug 28 2013 , New Delhi
Though opened multi-brand retail to 51 per cent FDI in September last year, no company has set up shop so far. Some analysts felt the delay was because they are waiting for the 2014 elections to happen to take a call. Allgeier said it was non implementation of GST that is holding them back.
‘As a strategy some retail chains may start small operation in India but no major retail chain will start operation in a big way before GST is rolled out in the country,” Allgeier told Financial Chronicle in an interview.
With the implementation of GST, Allgeier said that logistics and distribution costs too would go down by 10-15 per cent. Logistics cost is around 2-5 per cent globally but in India it was as high 7-12 per cent because of poor road and rail infrastructure.
While trucks move at an average speed of 80-90 km in Europe but India, it is 40-50 km. This meant that it takes almost double the time of Europe for transportation in India. Also turnaround time in ports and airports in India are not comparable world average. These bottlenecks will have to be removed if logistics costs have to be reduced in India.
The firm, which operates warehouses in 53 locations in the country, is of the view the GST will ensure that multi-brand retail firms can operate with less number of warehouses, thereby reducing costs taking advantage of economies of scale.
With annual sales of ¤20.3 million, 96,000 employees and about 2000 offices around the world, DB Schenker already provides logistics support to global multi-brand retail chains like Wal-mart and Tesco.
“You name any global retail chain, we would providing logistics support in some country or other,” he said adding when these retail chains come to India, Schenker India will offer logistics support.
Schenker India, which has offices in 37 locations in the country, proposed to increase its warehousing capacity to two million sq ft by this year end from the present 1.3 million sq ft. The company, which has been growing at 15-20 per cent annually would add one million sq ft of warehouse space in the country by 2015.
Allgeier said it is easy to move cargo from Europe to India than within the country due to several impediments. But economic slowdown notwithstanding, Schenker India sees huge potential for logistics business in the country.