Freight Vil­lages: The next step?

Cargo Talk - - Front Page - ABEER RAY

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.”

The Chal­lenges

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, Pas­sion­for­l­ogis­ 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.

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