Cargo Talk

Freight Villages: The next step?

- 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, 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.

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