Politics
How the new warehousing policy will transform India's logistics
Summary
The government has proposed a new warehousing policy that will set the roadmap for development of exclusive warehousing zones in public-private partnership (PPP) mode to ease transportation and reduce logistics cost in India. Mint takes a look:The government has proposed a new warehousing policy that will set the roadmap for development of exclusive warehousing zones in public-private partnership (PPP) mode to ease transportation and reduce logistics cost in India. Mint takes a look:
What to expect from the new policy?
The new policy is aimed at improving logistics throughout the country. The idea is to minimize pollution and traffic congestion in major cities. The modern warehouses will house cold-storage chains and will be able to store all kinds of cargo—wet and dry. These facilities are expected to come up outside city centres so that large trucks carrying the cargo do not need to enter the city to unload their goods. This will also help boost bulk carrying capacity and save fuel. These large vehicles can transport more goods compared to the smaller trucks we are used to seeing in cities.
Who will frame and implement the policy?
The policy will be framed by the National Highways Authority of India (NHAI). It will also be the implementing agency. There are land banks along the highways and expressways of the country with the NHAI. Tenders will be floated for such land parcels, inviting private players to develop warehousing zones in PPP mode on a revenue-sharing basis or for a fixed fee. The terms of the agreements will be finalized later. The proposed warehousing zones are part of the initiatives taken by the government to reform the transport sector, which accounts for a majority of goods movement across India.
What will be the impact on logistic costs?
Warehousing zones will help cut India’s logistics cost, which is 14%-16% of gross domestic product (GDP), compared to 8%-10% of GDP in China and 12%-13% in the US. The warehousing zones and multi-modal logistics parks (MMLPs) are being set up by the NHAI. The warehousing zones will help FMCG firms, steel and cement makers stock inventory near major hubs.
How will MMLPs aid warehousing policies?
Integration of multi-modal transport includes development of 35 MMLPs. The aim is to remove deficiencies related to logistics, draw the associated costs down, and strategically integrate highway projects and other connectivity initiatives such as inland water-ways and railways in tandem with the freight distribution ecosystem. The MMLPs are aimed at fostering inter-modal connectivity through dedicated railway lines and access from highways to provide connect-ivity to an airport or a seaport or an inland waterway terminal.
Which sector has been driving the demand?
The e-commerce sector has been driving the demand for logistics and warehousing across global markets and has emerged as the most prominent driver of Indian warehousing market volumes along with the third party logistics sector. This sector’s share in transactions has grown from 18% in FY17 to 31% in FY21. The Indian e-commerce market is on the cusp of its next phase of growth with Reliance Industries Ltd and the Tata group entering the fray. Thus far, Amazon.com Inc. and Walmart Inc. have driven the market.
