Two steps forward for warehousing
The issue of availability of land and acquisition of the same is a serious concern in view of the fact there is tremendous demand for organised and quality warehouses in India. Indian manufacturers, shippers and logistics players often face huge challenges because of paucity of world standard warehouses. And, lack of suitable land and stringent rules and regulations to acquire it remain the major facts behind slow growth of warehousing industry in the country. Recently, two initiatives were undertaken pertaining to supply of land likely to boost the industry. The initiatives include an apparent consensus to stop the impasse on the ‘Land Reform Bill’ and relaxation in the existing SEZ policy, announced in the Foreign Trade Policy Supplement for 2013-14. The gravity of poor warehousing infrastructure can be perceived from some recent research. It is estimated that warehousing costs to be between 20-25 per cent of the total logistics cost in India. Despite this the state of warehousing in India is largely dismal. About 80-85 per cent of warehouses are traditional with sizes of less than 10,000 sqft. Majority of the local operators of these warehouses are also small to mid-sized entrepreneurs with limited investment capacity. The only really large warehousing owners are government agencies including Central Warehousing Corporation and State Warehousing Corporations, but the focus of a significant majority of government warehouses is food grain storage. A research on supply chain systems in India unveiled that while regional distribution centers promise greater efficiency and effectiveness, few facilities in India today could fit the demand side. Called ‘godowns’, most Indian warehouses owned by multinational companies are small in size—between 5,000 and 25,000 sqft—compared to the 250,000to 1-million sqft structures found in the United States or Western Europe. Existing Indian warehouses tend to be located close to a customer base and carry only enough inventories to serve those customers. Keeping in mind the issues related to land acquisition, most companies entering India and adopting a regional network model consider a partnership with a thirdparty logistics company that already has a warehouse or land on which it can build a facility. The manufacturing and logistics industry can only expect the required investment in warehousing once the ambiguity and disputes regarding land acquisition stop. In addition, the amended SEZ rules were a long pending demand from the warehousing sector. The initiatives taken by various political parties and the Commerce & Industry Minister of India are commendable. Now, fast and transparent implementation will be the factors the industry needs to watch out for.