Freight Villages: The next step?
Despite playing a vital role in the Indian economy, the logistics sector lacks proper infrastructure, policy and management. To tidy up the picture, industry body ASSOCHAM recently proposed the concept of Freight Villages to the Centre. Although, further decisions are awaited, CARGOTALK gets in touch with ASSOCHAM and industry veterans to further explore this concept, expected to revolutionise the way logistical operations are conducted in India.
Freight Villages (FV) have been an ubiquitous concept in Europe and North America. A freight village is an area demarcated for activities pertaining to transport, logistics and the distribution of goods - both for national and international transit. A FV would typically consist of a cluster of facilities such as warehouses, break-bulk centres, storage areas, offices and car parks. Several logistics players – both big and small – cohabit the area, which allows a scope for synergies and makes way for cooperation. One of the major benefits is the collaborative aspect.
In a recent letter to Nitin Gadkari, Union Minister for Transport & Shipping, ASSOCHAM has mooted a proposal to introduce freight village in India. DS Rawat, Secretary General, ASSOCHAM says, “This is the most opportune time to launch the concept of freight village in India.”
Furthermore, with the trumpeting of ‘Make in India’, the manufacturing sector has come into limelight. Here’s why freight villages will prove instrumental for the same.
Rawat says, “As the Indian economy grows over the medium term, there will be a huge movement of cargo necessitating the strengthening of intermodal transport links and augmenting transport capacity. Moreover, there is a higher chance of inviting FDI into freight villages from countries like Germany, which are leaders in logistics. Also, the concept of freight villages can be incorporated into freight corridors (East & West) proposed for the Indian Railways. Finally, the changes recommended in the Land Acquisition Act will make it easier to acquire land for this purpose.”
Despite the important role of freight villages in generating synergies, promoting regional intermodal transportation and urban distribution, there are challenges besetting their implementation. The biggest, perhaps, would be the lack of coordination and cooperation between the Central and State regulators.
Karthi Baskar, Deputy Managing Director, Kintetsu World Express (India) explains, “Establishing freight villages would entail the risk of over-supply, since many players would want to open logistics centres within their jurisdictions.”
Horizontal cooperation in freight and logistics typically pays little attention to the impediments towards closer relationships between firms.
Shreyas Malkan, Founder & CEO, Passionforlogistics.com opines, “It is important to reduce carbon footprints by eliminating interstate check posts and toll points in order to cut down transportation costs by nearly 30 per cent. If this is acted upon, then the logistics industry would be willing to support efforts to set up a freight village.”
A strategic location is important for a freight village, since it incorporates various functions of a logistics centre.
Stressing on the point, Pradeep Panicker, Chief Commercial Officer, DIAL says, “An air freight village needs to be located at or very near the airport. It would primarily act as a consolidation point for air cargo, coming from various facilities and hubs, to be exported to different destinations worldwide.”
Nazir Ansari, Senior VP – SCM, Leeway Logistics says, “A typical freight village should be at or near the crossroads of two or more major highways and rail connection points. It should be well integrated within the facility and it should have extensive intermodal functionality. Also, it should also be located close to a major metropolitan area that would serve as a market.”
Investment and Ownership
In most countries, freight villages are owned by the private sector. These villages are developed by large-scale operators and ASSOCHAM has proposed similar mode of ownership.
Manish Puri, Managing Director, India Infrastructure & Logistics, highlights, “Since common facilities (specifically land) are needed in freight villages, the best solution would be to create a mix of public and private players. The Government should ideally remain responsible for providing the land and base infrastructure such as roads and power, and then let private developers build various facilities.”
Should a freight village be integrated or non-integrated?
An integrated freight village would cater to the needs of air, rail, inland waterways and coastal shipping. Experts believe that India needs a combination of integrated and non-integrated freight villages,
never integrated with various modes of transport. This has made the facilities operate in the silo and to an extent the infrastructure developed was not utilised fully to its potential.
So, the need of the hour is a gradual shift towards an efficient integrated logistic system for effective freight movement.”
Aditya Gupta, Zonal Business Head – North, Drive India Enterprise Solutions highlights, “Large logistics centres like metros and other tier-I cities would need to be integrated in the freight villages. The Indian Railways’ Dedicated Freight Corridor would also create opportunities for creation of integrated freight villages alongside. Smaller cities can have non-integrated freight villages to address logistics needs for that geography. These would be connected with integrated freight villages.”
Moreover, implementation of GST will further augment the benefits of a freight village, since easing although the cargo sector is still undecided on this.
Adil Zaidi, Partner - Government and Transaction Advisory Services, Ernst & Young LLP advises, “In the past, logistics infrastructure included logistics parks or hub, multimodal logistics parks and FTZs, but these facilities were of movement of goods will pave the way for a concerted effort to streamline the supply chain.
The freight village concept can contribute to a planned infrastructure and reduce the transaction cost of logistics by providing various freight related services in the same close proximity.