Want govt to bring fuel under GST in Budget 2023: Gati CEO

Here, Sarkari shares his outlook for the logistics sector, the kind of companies he wants to buy and his worries about a potential driver shortage in India

It has been 1.5 years since logistics veteran Pirojshaw Sarkari took the helm of Gati Ltd. In an interview last month, he told DH’s Shakshi Jain and Dhanya Skariachan about his expectations from the PM Gati Shakti scheme, his outlook for the logistics sector, the kind of companies he wants to buy and his worries about a potential driver shortage in India. Edited excerpts.

In 2021, you talked about looking to become a Rs 3,000 crore company in three years. Are you on track to achieve that goal?

Oh, absolutely. We are on track to achieve that goal.

At one point in the past, Gati tried doing too many things and lost its focus on express logistics. Have you moved away from those non-core businesses?

In my interview with my chairman, there were two things that we agreed upon - one is that we will either close down or sell off the other businesses that Gati had got into and we will focus only on the express logistics business and the other point was that we will run this business asset-light. Most of the other businesses are either closed or sold off. There are a couple of them, which have some cleanup to be done from either a regulatory perspective, but there is no business happening in those businesses. We have sold off all the trucks that Gati owned. We now work only with partners and we have also been selling off most of the operating units that we own.

How much progress have you made on the infrastructure-building front?

I identified that if we have to grow Gati, the current infrastructure will not allow us to do so. In an express logistics business, the hubs play a very important role. So I identified eight cities of India to start with. Ultimately, we will do more than 20. Out of the eight hubs, we’ve got four (Delhi, Mumbai, Nagpur and Guwahati) in place. Bangalore, Kolkata, Hyderabad and Indore are the next four. Bangalore and Indore should be up and running before this financial year-end. And the next two will get over by mid-next year.

Could you please tell us about your efforts on the digitisation front?

It is two-fold: Front-end, which is customer-facing digitisation, and back-end, which is operational digitisation. One helps you increase your revenue. The other helps you optimise your cost. The front-end digitisation is over and done.

On the back-end side, it’s a massive exercise. We believe that we need to now revamp the entire technology and make it more agile. We are at a stage where we are evaluating large tech companies to come in and partner us in this journey, which would take 15 to 18 months to build out.

How has the logistics industry performed after what seems like the worst of the pandemic?

They say that come what may, liquor and medicine always sells, right? But there is a third one, which also never stops really is logistics, right? Because you have to reach goods to the end customers. We were definitely hit during the pandemic in a big way. If manufacturing stops, what do we move, right? But pharmaceuticals were moving. That was one industry that kept us alive, I must say, during that time. But, I think, post the two years, we see consumption coming back into the market.

Have you observed any benefits from government policies such as Gati Shakti and the National Logistics Policy on ground so far?

So on ground so far, no.

By when do you think the benefits will be substantially visible?

I think in the next 18 to 24 months.

Logistic costs are currently about 13-14 per cent of the GDP. The National Logistics Policy aims to bring it down to 8 per cent. By when will we get close to this target?

Very difficult question, but I think you’ll see a sudden drop in the next 24 to 36 months because (the) initial drop will be big. If you see the countries which have (their logistics costs at) 8 per cent or 9 per cent (of GDP) like Germany and Japan, the efficiencies are tremendous. So, the government can only give you the infrastructure, the rest we have to do.

Could you please shed light on your acquisition plans?

Recently, Mahindra Logistics announced the acquisition of Rivigo and just a few months before Delhivery announced the acquisition of Spoton. And I think it is only the tip of the iceberg. If you have to really gain size as we would like to because it’s a very high-volume, low-margin game, size does matter over there. We will have to consolidate the unorganised into the organised. So you will see a lot of this happening where small players get bought out by the larger players.

There are two kinds of acquisitions that I always look out for - one is to add on a new product or process in Gati. The second thing is industry focus. And sometimes you have to do (something) inorganic to get into an industry. One of those for us would be the pharmaceutical industry which definitely requires certain expertise, which is different from general logistics.

What keeps you up at night?

I think being in the logistics industry, my nightmare is -will we have enough drivers, truck drivers, left in India, in the next 10 years? And why I say that, two things are happening. If you ask a truck driver’s son, would you like to become a truck driver? The answer is a flat no. The other thing is there is (a) huge shortage of drivers in US and Europe that has suddenly come up and they’re all looking at places like India. I strongly believe that even those who are good drivers, if they get an opportunity, from Europe and the US, they would definitely want to move there and that would leave a big void to the logistics industry in India.

So I think something drastically needs to be done about the driver community in India. It will have to be a movement, it cannot be a single company doing something about it. And we keep hearing about skilling schools. But, in the driver community, the only way we can really get people to say ‘Oh, I want to become a driver’ is to give some respect to that job. That job has zero respect.

What do you want from the government in Budget 2023?

Can we please bring GST into fuel? Today, fuel is one of the excluded items from GST. It is still not on GST. I think that will help the trucking community in a big way in the input tax that we can get on this large spend.

At the end of the day, when you spend on trucking, the single largest spend is fuel. And if fuel does not have GST, we cannot take input tax credit on that tax that we pay.