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Construction : Focus | December 2016 | Source : Infrastructure Today

Impact of demonetisation on infrastructure

Land transportation was a cash-driven sector as it is a very fragmented and unorganised sector. Transition to a ´plastic economy´ would obviously remove hidden costs. This is a cultural change.
Captain Ramanujam, Chief Executive Officer, Logistics Skill Council (LSC)

This sector has had a high lean on cash being used in operations. It has been opined across diverse platforms that there has been a hit of `10,000 crore in the logistics sector as an aftermath to the demonetisation effect. We believe that this is a temporary phenomenon and will correct itself to present realities in the near term. Also, this has led to many players to organise, re-calibrate their operations, look at the need of cash being used by their resources during the trips, and getting a method to handle this more practically.
Jyotheesh Kumar, Chief Executive Officer, ValueShipr

A large number of logistics companies depend on cash for their daily operations, whether it is paying of tolls, driver allowances, meals for drivers during transit, and maintenance expenses. The demonetisation exercise has paralyzed the day-to-day operations of a large number of logistics players and this has resulted in short-term disruption of the entire supply chain. Even the warehousing sector, where many operators pay their daily labourers in cash, has been impacted due to this move. However, this is just a temporary setback and we expect operations to get back to normal post December with the availability of ample cash in the system. Recent initiatives by the government such as digital payment acceptance at all toll plazas and fuel pumps have already started showing their impact on the ground, with most of the logistics players moving towards a cashless system wherever it is possible.
Dr Samantak Das, Chief Economist & National Director-Research, Knight Frank India.

The Indian logistics industry has had high dependence on cash for its operations right from paying toll charges, fuel costs and employee salaries to paying for transactions with producers, wholesalers and retailers. Thus the demonetisation exercise has adversely impacted the demand as well as working capital cycles in the short term till the end of the current financial year.

We see companies proactively working with their partners in encouraging, training and facilitating them to adopt electronic banking and modifying their business operations to accommodate frequent and smaller supply cycles to reduce cash requirements, in order to tide over the current cash crunch.
Manish Panchal, Sr. Practice Head, Chemicals & Supply Chain Management, TATA Strategic Management Group.

Following the government´s decision to demonetise high value currencies of `500 and Rs.1,000, there has been a 20 per cent fall in the e-tailing revenue of e-commerce companies accruing from cash-on-delivery (COD) shipments. With companies foregoing the´COD surcharge´, their bottom lines are going to be impacted significantly.

Around 60 per cent of the consumption basket in India, including food, transport, real estate and restaurants, is driven by cash transactions.
The motor-transport business, 80 per cent of which is cash-based, has been impacted the most. The delivery of essential products like milk, vegetables and food-grains has been hit the most as bulk purchases in markets has almost halted and truckers have been forced to stop intrastate and interstate ferrying of goods on account of drastic shortage of liquid cash.

Areef Patel, Vice-Chairman, Patel Integrated Logistics Ltd.

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