IIM-Nagpur study: Mihan needs to gear up to reap GST gains

NAGPUR:A study by the city-based Indian Institute of Management (IIM-Nagpur), to evaluate the ‘potential of Nagpur as logistic hub post GST’, has warned that besides competition from neighbouring states, the geographical advantage the city enjoys by being at the centre of the country would be lost if issues like fixing electricity tariff, decision making authority and single window clearance are not resolved at the earliest.
The IIM-N study was conducted under the field immersion programme with Nagpur divisional commissioner Anoop Kumar. He has forwarded the report to the state finance ministry, where it was presented before senior bureaucrats. With the Goods and Services Tax (GST) Bill passing a major hurdle of Rajya Sabha, the state will have to act fast as the Union government is most likely to roll out the revolutionary tax reform from April 1 next.
The study recognizes that GST regime would favour the city most, and it could become the preferred destination for fast growing logistics industry, e-commerce, and manufacturing industry, especially pharmaceuticals. But then it cautions that it would be difficult to reap the gains without the appropriate measures and initiatives.
Adding to the difficulties Nagpur faces are the headway made by states like Madhya Pradesh and Andhra Pradesh in logistics and warehousing. On global level, cities like Jamaica are using the strategic location at the mouth of the Panama Canal to promote themselves, the report points out.
Given Nagpur’s strategic location advantage, combined with a few encouraging entry initiatives (in the form of Mihan), the report recommends measures to be implemented to turn the logistic hub dream into a reality.
“There is ambiguity as to which specific department will address concerns or take decisions on regulation of warehousing and logistics industry. Maharashtra should be specific on this,” the report stresses. In another important recommendation, the report suggests the electricity tariff, if changed to industrial, will lower the cost of operating warehouses. “One of the most important inputs for warehousing is electricity. The state charges commercial tariff instead of industrial tariff for electricity supplied to warehouses,” it points out.
The strategic locational advantage and its importance needs to be marketed across all sectors to attract investments in the logistics segment. For a hub and spoke model, the location preferred is a geographic centre of the preferred market. Underlining that ‘early bird catches the worm’, the report says industry policy framework and regulations should be in place before GST is rolled out; with the warning that there is stiff competition from wannabe hubs like Indore and Hyderabad.
Considering Nagpur’s infrastructure capability and better connectivity by road, rail and air, and the head start, it should start pooling land to establish Free Trade and Warehousing Zones, an equivalent of SEZ. There is a need for good supporting infrastructure to Mihan, the report says. Sources said the proposed superhighway between Nagpur and Mumbai could shorten distance and time to reach ports like JNPT and Mundra, to cater to domestic as well as export markets.
The study identified areas across Amravati Road and Wadi, and from Mihan to Borkhedi, with large presence of warehouses with access to rural areas, as potential growth areas for export-import in agriculture based business.
The IIM-N report, sources said, has been whetted by its mentor IIM-A, the premier business school, and would be used by the government to take full advantage of GST and to develop Nagpur as a logistics hub that it has been dreaming of for over a decade.