Two steps for­ward for ware­hous­ing

Cargo Talk - - Editorial -

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.

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