Tamil Nadu’s New Logistics Policy Aligns with India’s Infrastructure Masterplan

Tamil Nadu recently launched its Logistics Policy and Integrated Logistics Plan (TNILP) 2023, focused on advancing the infrastructure and logistics sector in the state, with the aim of creating 140,000 to 160,000 direct and indirect job opportunities. The plan includes fiscal incentives for logistics service providers, technology providers, and integrated logistics park developers, with a one-time reimbursement of 100 percent of the patent registration fees and a one-time cash award of 50 percent of technology adoption cost, among others. The plan also offers a 25 percent subsidy on the capital cost for setting up green and sustainable initiatives for integrated logistics park developers. An initial investment outlay of INR 625.41 billion has been estimated, covering 50 interventions across six policy strategic themes.

The southern Indian state of Tamil Nadu unveiled its Logistics Policy and Integrated Logistics Plan (TNILP) 2023 on March 18, which foresees several specific interventions across a five-year and 10-year period, respectively.

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These will address inefficiencies across the existing infrastructure (trunk and terminal), services, and operating and regulatory environment in the state. They will also generate between 140,000 to 160,000 direct and indirect employment opportunities.

An initial investment outlay of INR 625.41 billion has been estimated for the TNILP 2023, which is subject to change as the plan is envisaged to be updated on a rolling basis to consider emerging trends and requirements. Additional interventions may also affect the investment outlay.

Logistics efficiency, or reduction in logistics costs, are necessary for trade competitiveness and export growth and diversification, and Tamil Nadu aims to enhance its performance on all these fronts.

Source: National Council of Applied Economic Research (NCAER)

The Tamil Nadu Logistics Policy and Integrated Logistics Plan 2023 document comprises:

• A Logistics Policy to establish a comprehensive policy framework for the integrated advancement of the logistics industry within the state, with the goal of bolstering economic growth over the next five years.
• An Integrated Logistics Plan that covers the next 10 years and includes a range of interventions identified from the initial baseline study, detailing their expected outcomes, timeline, and key stakeholders responsible for implementation. The plan will be updated on a rolling basis to keep up with emerging industry requirements and developments, considering the results of previously identified interventions and input from stakeholders.
• To execute the Logistics Policy and Integrated Logistics Plan, an institutional framework and mechanism will be established to leverage a two-tier institutional structure. This structure consists of an Empowered Group of Secretaries (EGoS) and a Network Planning Group (NPG) created under the PM Gati Shakti initiative. The primary purpose of these groups will be to coordinate and facilitate the integrated development of the logistics industry in Tamil Nadu.

Tamil Nadu’s 2023 Logistics Policy

Planned interventions

Fiscal support

The Tamil Nadu Logistics Policy 2023 will offer fiscal incentives for a duration of five years from the policy’s promulgation date. The possibility of extending these incentives will be evaluated based on their effectiveness and emerging needs.

Criteria for eligibility and extent of coverage:

• Only units registered and operating within the boundaries of the Tamil Nadu state will qualify for the incentives outlined in this policy.
• The incentives will be extended to new units and projects that are set to commence operations within the effective period of this policy.
• Existing units and projects that have commenced commercial operations prior to the promulgation date of this policy will also qualify for incentives, provided they are taking initiatives that meet the eligibility criteria during the policy period.

The provision of fiscal incentives will be extended to the following logistics facilities and activities as defined below:

Technology and innovation

Technology providers, start-ups, and other business units developing technology-enabled solutions for logistics efficiency improvement in Tamil Nadu will receive a one-time reimbursement of 100% of the patent registration fees in India. The reimbursement will be subject to a cap of INR 25,000 per patent. Additionally, individual entrepreneurs who are residents of Tamil Nadu can also avail themselves of this incentive.

Service providers

Logistics service providers having registered offices in Tamil Nadu can apply for a one-time cash award of 50 percent of the technology adoption cost, up to a cap of INR 10 million. The award will be granted annually to three applicants who adopt modern technologies, such as RFID, Global Positioning System (GPS), IoT, robotics & automation, blockchain, artificial intelligence, and data analytics.

Trucking enterprises

Logistics trucking companies and enterprises registered in Tamil Nadu can receive a one-time reimbursement of 100 percent of vehicle registration charges and road tax for one year for reefer trucks. This incentive will also cover retrofitting of capacity of over 15 MT. The fiscal incentive will be available for the first 500 reefer trucks registered during the policy period in the State.

Training costs for employees in C-District logistics projects

There are also special incentives for logistics infrastructure as defined under the Tamil Nadu Industrial Policy (TNIP), 2021, including training subsidy for logistics and warehousing projects set up in “C” Districts.

Incentives for Integrated Logistics Parks

Developers of Integrated Logistics Parks located in “B” and “C” category districts in Tamil Nadu will be eligible for special incentives for warehousing and logistics.

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The incentives are defined in Para 15 of the TNIP, 2021, “Special Incentives for Industrial Parks.” The developers must meet the criteria for an Approved Logistics Park as specified in Annexure VI of the TNIP 2021. This annexure will be amended – with 100 percent relaxation in the non-processing area of the park area.

The following incentives will be available for eligible developers:

Capital subsidy: Developers of Integrated Logistics Parks will be eligible for a capital subsidy of 12 percent or 15 percent of investment in internal infrastructure (such as internal roads, water distribution infrastructure, street lighting, drainage facilities, landscaping, and green areas) in “B” or “C” category districts, respectively.

The subsidy will be provided in two stages, based on specific milestones. The first 50 percent of the amount determined as Capital Subsidy will be provided upon paid-up allotment of 50 percent park area along with 10 percent operational units. The remaining 50 percent will be provided upon paid-up allotment of 75 percent park area with 25 percent operational units. The subsidy amount will be distributed in equal annual instalments over five years.

Logistics Park housing incentive: In addition to the Capital Subsidy, Logistics Park developers will be eligible for a housing incentive of 10 percent on the cost of developing residential facilities within the Logistics Park over a period of 10 years from the date of completion of the investment in the housing facility. The incentive will be subject to a ceiling of INR 100 million.

Green Logistics Park incentive: Developers of Integrated Logistics Parks who undertake green and sustainable initiatives as listed in the Tamil Nadu Industrial Policy, 2021, Para 13.5.3, will be eligible for a 25 percent subsidy on the cost of capital for setting up such initiatives, subject to a cap of INR 5 million.

Implementing authorities

Operational guidelines

The Tamil Nadu Industrial Development Corporation Limited (TIDCO) will be accountable for developing operational guidelines for fiscal incentives provided under the Logistics Policy.

Assessment of proposals

For investments exceeding INR 500 million, Tamil Nadu Guidance will assess proposals/applications and forward its recommendations to the Industries Department for approval of incentives.

For investments below INR 500 million, the proposal/application evaluation will be conducted by FaMe TN, and the incentives will be approved by the Commissionerate of Industries and Commerce. (FaMe TN is the state trade and investment promotion bureau for micro, small, and medium businesses in Tamil Nadu.)

Incentive disbursal

The State Industries Promotion Corporation of Tamil Nadu Limited (SIPCOT) will act as the disbursal agency for various incentives listed in this policy for investments exceeding INR 500 million. Whereas for investments below INR 500 million, the Industries Commissioner and Director of Industries and Commerce (ICDIC) will be responsible for disbursing incentives.

Approvals and clearances

Tamil Nadu Guidance, being the designated nodal agency for facilitating single window clearances, will extend the same to logistics enterprises in the State for investments exceeding INR 500 million. For the MSME segment, the FaMe TN department, Commissionerate of Industries and Commerce, and District Industries Centre will undertake single window facilitation.

Tamil Nadu Integrated Logistics Plan, 2023

The Tamil Nadu Integrated Logistics Plan (TNILP), 2023 provides a comprehensive roadmap for the next decade. It outlines the identified interventions, expected outcomes, timelines, and key stakeholders responsible for their implementation. A systematic and consultative approach was taken to conduct a gap and needs analysis to identify the required interventions for the plan.

The Integrated Logistics Plan covers both short-to-medium term (2-5 years) and long-term (5-10 years) interventions, encompassing a total of 50 measures that span the six strategic themes/policy levers. These interventions aim to tackle the challenges and development needs of the logistics sector in the State.

The Plan also notes the stakeholders responsible for implementation of the interventions – the state government, central government, joint initiative, or public private partnership (PPP). Accordingly, the Plan lists all the ministries, departments, and implementation agencies involved for each policy objective and focus area.

Planned interventions

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