Mumbai: Logistics firms are building warehouses and logistics parks across India as the country gets ready for a centrally administered goods and services tax (GST) expected from 1 April.
The GST will standardize rates across the nation, allowing many corporations to move away from having warehouses in different states to adhere to each state’s tax code, and employ logistics companies to manage distribution and supply chains.
“With GST coming in place, a lot of consolidation is expected in this space. The case for having a warehouse in each state will disappear,” said Aswatha Nagendra, country manager with supply chain consultancy firm Logistics Consulting Asia, and a 26-year veteran in the industry.
Expansion drive: A Safexpress facility in Gurgaon. A Crisil report says the introduction of GST will result in greater adoption of a hub-and-spoke model in infrastructure segments such as warehousing. Ramesh Pathania / Mint
“Big corporations such as Larsen and Toubro, ITC and Philips are planning to close down their regional warehouses in the wake of GST coming in,” said an executive with a logistics company. “Many corporations have approached us to handles their distribution and logistics part to cut down the cost.” He declined to be identified as a number of domestic and international companies that are shuttering warehouses are his clients.
Logistics firms such as Safeexpress Pvt. Ltd , Transport Corp. of India Ltd, Gati Ltd, Casby Global Air Pvt. Ltd, VRL Logistics Ltd, NDR Warehousing Pvt. Ltd, Shree Shubham Logistics Ltd, AFL Pvt. Ltd and Arshiya International Ltd are now building warehouses or logistics parks.
In a report released Wednesday, Manoj Mohta, head of Crisil Ltd’s research wing, said the introduction of GST will result in greater adoption of a hub-and-spoke model in infrastructure segments such as warehousing, cold chain, container freight stations and inalnd container depots.
“The realignment of the infrastructure needs would aid in the reduction of the number of intermediaries and also help streamline supply chain operations,” Mohta wrote, adding that this would reduce infrastructure spending on logistics and supply chain and cut inventory costs for companies.
Yogesh Dhingra, chief operating officer at Blue Dart Express Ltd, said bigger firms are open to outsourcing transportation to experts in the industry while his company’s warehousing requirements are met through parent company DHL Group.
Pawan Jain, chairman and managing director of Safexpress, which operates 3,500 trucks, and counts Raymond Ltd and Ranbaxy Laboratories Ltd among clients, said most of the leading manufacturers currently have 20-25 warehouses across the country. “With GST, this will change and companies like us will take charge,” he said. “We are building 32 logistics parks with an investment of Rs650 crore by 2011. By then, we will have 10 million sq. ft of warehousing space.”
Arshiya International is building India’s first free trade warehousing zone, which will have integrated transport infrastructure. Kapil Anand, chief executive, free trade warehousing zone, operations, said the company would have five such zones with 10 million sq. ft and that all facilities would be rail linked
Vineet Agarwal, executive director of Transport Corp., said his firm builds a million sq. ft of warehousing a year as companies demand more organised and well-designed warehouses. Transport Corp., which owns about 1,200 trucks, manages 7.8 million sq. ft of warehousing space.
AFL is also expanding operations. “We intend to purchase, design, build and operate warehouses. We are planning to have one to two million sq. ft of warehouses,” said Juzar Mustan, chief executive officer, logistics, AFL, which has a fleet of 1,000 trucks.
Shree Shubham, a subsidiary of Kalpataru Power Transmission Ltd, plans to set up 41 warehousing and agri-logistics parks in nine Indian cities with an investment of over Rs600 crore.