Revised policy for CFS,ICDs to address overcapacity concerns

In a significant recent development, the Central Board of Indirect Tax and Customs (CBIC) notified revision in policy and guidelines for setting up of Container Freight Stations (CFS), Inland Container Deport (ICD) and Airfreight Stations (AFS). The revision in policy has been undertaken to boost investment in the sector as well ensuring development of more regions where these physical infrastructure units can come up in larger number instead of their concentration to certain locations. As per the notification, the locations will now be classified as Green Blue or Red.

“ The green zone will be the locations where the ICD/CFS concentration are low and will be open for new proposals, in case of blue zones the proposals will be accepted only based on specific trade generating locations and in red zone, the new proposals may not be accepted, except in exceptional cases. Further, there are also distance norms between two facilities and from ports. The approvals will be in consonance with national logistics policy/action plan,” a note issued by credit rating agency ICRA said.

“ The new policy considers the issues faced by the sector; including regional disparities in concentration of facilities, with high concentration of CFS in Western and Southern regions and the adverse impact of new initiatives like Direct Port Delivery (DPD)/ Direct Port Delivery (DPE) on the CFS sector. While, the impact on volumes due to DPD implementation has stabilised to some extent, the margins have witnessed pressure and with growing investments in warehousing space, only CFS players with larger logistics offerings allowing them to re position their services will be able to continue in the long term. Hence, the zoning and distance rules in the revised policy will aid in more balanced development in the sector and prevent concentration of facilities which will improve the viability of existing/upcoming facilities by reducing competitive pressure,” K Ravichandran, Senior Vice President and Group Head, Corporate Ratings, ICRA further commented.

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