COVID-19 impact on Logistics sector
By Jatin Aneja, Partner, Shardul Amarchand Mangaldas &Co
“Presently the pandemic has had limited impact on domestic movement of goods and services. International Shipments have of course seen enhanced screening and quarantine measures which are being implemented at Ports and for Air Cargo, which have affected delivery timelines. This has been compounded by international supply chain disruptions, particularly for imports from affected countries resulting in potentially delayed and reduced shipments.
As the situation develops, industry players may also be faced with new challenges in form of (i) a changed landscape of consumer demand with a potential move away from consumer durables in the short term, and (ii) managing the pandemic’s impact on the manufacturing sector, which has presently not seen significant disruption.
It would be critical to ensure that the sector is duly insulated from shocks on either end, from a supply as well as a credit perspective. Over the coming few weeks, particularly for areas/ sectors affected with supply chain disruptions, it would not be unusual for suppliers to extend shorter credit and for customers to seek longer credit periods, which would directly impact cash flows and inventory management for logistics players. Affected counterparties may also seek to pass on the pandemic risk to these players by utilising no-fault contractual exclusions such as force majeure, in contracts that present lower viability.
Further, players would need to work with the government authorities to develop and implement enhanced protocols for screening and traceability of personnel (especially drivers), and action plans to deal with reduced mobility scenarios. The Government could also consider measures such as easing toll and tax enforcement and collection, travel and transit time related restrictions and ensuring access to cheaper credit to the sector, to ensure that the sector is able to rise to the expectations of these challenging times.”