Lo­gis­tic parks: Sub­sidy on land for or­gan­ised ware­hous­ing?


The ware­hous­ing sec­tor has wit­nessed a re­mark­able shift from a con­cept of four-walled godowns to ul­tra mod­ern lo­gis­tic parks with state-of-the-art fa­cil­i­ties. With the growth of or­gan­ised ware­hous­ing, does gov­ern­ment need to fa­cil­i­tate lo­gis­tic parks in the coun­try by giv­ing sub­sidy on land for set­ting up of these parks? Some ar­gue that the Gov­ern­ment must ease the set­ting up of lo­gis­tic parks by giv­ing sub­sidy whereas oth­ers claims that it may not give pos­i­tive re­sult to the econ­omy. Read on to find out which way the de­bate swings...

Man­ish Gupta Man­ag­ing Di­rec­tor, RCPL Lo­gis­tics

The In­dian ware­hous­ing sec­tor is pro­gres­sively get­ting rede­fined from the tra­di­tional con­cept of ‘godowns’ to mod­ern large lo­gis­tic parks with state-of-the art fa­cil­i­ties. But, more needs to be done, and the gov­ern­ment must fa­cil­i­tate lo­gis­tics parks by giv­ing sub­sidy on land for set­ting up these parks .The to­tal share of or­gan­ised ware­hous­ing space is less than eight per cent of the to­tal ware­hous­ing space in In­dia.

‘Make in In­dia’ cam­paign will lead to an in­crease in man­u­fac­tur­ing which will cre­ate op­por­tu­nity for the lo­gis­tic parks for ad­e­quate stor­age ca­pac­ity and strate­gic lo­ca­tion will en­able ef­fi­cient func­tion­ing. The Gov­ern­ment can fur­ther en­sure speedy process in land ac­qui­si­tion, bank loan at low in­ter­est rate for con­struc­tion of ware­houses, sim­pli­fi­ca­tion in fund­ing process, Goods and Ser­vice Tax (GST) im­ple­men­ta­tion, ded­i­cated freight cor­ri­dors, bet­ter rail net­work, mod­erni­sa­tion of ports, util­i­sa­tion of PPP model.

Aakanksha Bhargava CEO & Pres­i­dent, PM Re­lo­ca­tions

Con­sid­er­ing the lack/ab­sence of the ap­pro­pri­ate scale, qual­ity of ware­hous­ing in­fra­struc­ture, low cap­i­tal and op­er­at­ing ef­fi­cien­cies; the need to fa­cil­i­tate lo­gis­tic parks in the coun­try should be strongly ad­dressed. Get­ting sub­sidised land from the gov­ern­ment would also help in lever­ag­ing the cur­rent con­di­tion of ware­hous­ing in­dus­try. Apart from giv­ing sub­sidy on land for set­ting up lo­gis­tic parks the Gov­ern­ment could also in­tro­duce the GST and Na­tional Pol­icy on Han­dling, Stor­age and Trans­porta­tion. Thus it of­fers a boost to the in­dus­try and helps it fo­cus its re­sources on an or­gan­ised ware­hous­ing sec­tor.

The ware­hous­ing in­dus­try in In­dia was val­ued in ` 745 bil­lion at FY 2013 and has been con­stantly grow­ing at 15 per cent for the last three years. Fur­ther, with chang­ing busi­ness dy­nam­ics it is ex­pected to grow at a rate of 18 per cent till 2017. How­ever, still a larger seg­ment of the ware­hous­ing in­dus­try is dom­i­nated by the un­or­gan­ised na­ture of the in­dus­try, which was close to 90 per cent by the end of 2014.

Srini­vas Sat­ti­raju CEO, Delex

Ware­hous­ing in In­dia is get­ting bet­ter with the tech­nol­ogy, pro­duc­tion and process in­no­va­tion. In my opin­ion giv­ing sub­sidy on land for set­ting up lo­gis­tic parks in the coun­try, at this junc­ture, is not re­quired as ware­hous­ing re­quire­ments are gov­erned by mar­ket de­mand and mar­ket con­cen­tra­tion, pre­vail­ing tax struc­ture, and a sub­sidy given for ware­hous­ing may not give any pos­i­tive re­sults to the econ­omy. For ex­am­ple in a post GST sce­nario the dis­tri­bu­tion mod­els will un­dergo a change and com­pa­nies may not use the lo­ca­tion where a sub­sidised ware­hous­ing park is set up. In­stead it is bet­ter to of­fer such sub­si­dies to in­di­vid­ual ware­house in­fra­struc­ture cre­ators, who would be will­ing to cre­ate re­quired ware­hous­ing in­fra­struc­ture in a large in­dus­trial de­vel­op­ment cor­ri­dor.

In­stead of sub­sidy, it is bet­ter to pro­mote clean ware­hous­ing and re­strict ex­ces­sive con­cen­tra­tion of ware­houses in a par­tic­u­lar area. This causes se­vere traf­fic con­di­tions on ac­count of con­cen­trated ve­hic­u­lar move­ment clog­ging the roads in a given area. It is bet­ter that the Gov­ern­ment comes with broad guide­lines for ware­hous­ing setup/busi­ness.

• Al­lot sep­a­rate ar­eas in all ma­jor towns and cities to­wards con­struc­tion of ware­houses and sup­port with nec­es­sary in­fra­struc­ture. More im­por­tantly, split the al­lo­ca­tion to dis­perse the ware­hous­ing con­cen­tra­tion in one area caus­ing se­vere im­pact on the city’s pop­u­la­tion.

• The ex­ist­ing ar­eas with high den­sity of ware­houses can be de­clared as No­ti­fied Lo­gis­tics Zones (NLZ) and a spe­cial NLZ ad­min­is­tra­tion unit is needed to ad­dress all as­so­ci­ated in­fra­struc­ture and util­ity needs.

Amit Ba­jaj Di­rec­tor, Mi­tuj Mar­ket­ing

Lo­gis­tic Parks will go a long way in de­vel­op­ment of ware­hous­ing in­fra­struc­ture. With GST im­ple­men­ta­tion large for­mat ware­houses will be needed ac­cord­ing to the ge­o­graphic dis­tri­bu­tion strat­egy of the com­pany. At present ware­houses are lo­cated as per the le­gal re­quire­ments of the Gov­ern­ment. This change of strat­egy would need gov­ern­ment sup­port to de­velop new trans­porta­tion hubs.

Thus, the in­dus­try would need sub­sidised land, park­ing fa­cil­i­ties, driver fa­cil­i­ties and wide roads with by­pass and city con­nec­tiv­ity. Con­nec­tiv­ity to the smaller towns has to be im­proved as the cargo will be trans­ported di­rectly to the smaller towns or cities.

Ra­jiv Kochhar

Vice Pres­i­dent, Worlds Win­dow

I would like to raise two points re­lated to lo­gis­tic parks and ware­houses: There are nu­mer­ous bar­ren land parcels near the highways and are not fit to use for agri­cul­ture now. If Gov­ern­ment and lo­cal author­i­ties will take in­ter­est, these lands can be used for de­vel­op­ment of ware­house and lo­gis­tic parks. And, if these lands can be used for de­vel­op­ment of ware­house and lo­gis­tic parks, it will not only help to utilise the un­used land but also give em­ploy­ment op­por­tu­nity to the com­mu­nity in nearby ar­eas.

Gov­ern­ment and lo­cal author­i­ties should take the ini­tia­tive to de­velop con­nect­ing roads to such land or plots and de­velop these lands for com­mer­cial pur­pose and con­trib­ute in eco­nom­i­cal growth. As this will be the util­i­sa­tion of non-pro­duc­tive land, Gov­ern­ment should ease the norms of ac­qui­si­tion of such land. The Gov­ern­ment should con­sider the tax hol­i­day for pro­mo­tion of ware­house in­dus­try and lo­gis­tic parks and pro­vide cap­i­tal at low in­ter­est rate.

Aditya Bafna

Ex­ec­u­tive Di­rec­tor, Shree Shub­ham Lo­gis­tics

Ware­hous­ing in­fra­struc­ture is in the de­vel­op­ing stage in In­dia. The pri­vate sec­tor has put ef­forts in de­vel­op­ing world class stor­age and other al­lied in­fra­struc­ture along with as­sist­ing the Gov­ern­ment in op­er­at­ing and man­ag­ing its ex­ist­ing stor­age in­fra­struc­ture via Public Pri­vate Part­ner­ship (PPP) route which has set new stan­dards for the in­dus­try.

Land be­ing a crit­i­cal com­po­nent for con­struc­tion of ware­houses is not read­ily avail­able. Also, high land cost near the Agri­cul­ture Pro­duce Mar­ket Com­mit­tee (APMC) and mar­ket ar­eas and high con­struc­tion norms like us­age of land are also a de­ter­rent fac­tor. The only so­lu­tion to ad­dress the is­sues is to fa­cil­i­tate and need for quick dis­posal of the sub­sidy for set­ting up the lo­gis­tic parks.

There are no two opin­ions on the im­por­tance and crit­i­cal­ity of agri­cul­tural sec­tor to In­dian econ­omy. There is a need to en­cour­age and in­cen­tivise pri­vate sec­tor for mak­ing in­vest­ments in agri­cul­tural stor­age and mar­ket­ing in­fra­struc­ture. How­ever, de­spite con­tin­u­ous and well-mean­ing ef­forts of the Gov­ern­ment through its var­i­ous chan­nels, this sec­tor needs sup­port in ad­dress­ing the is­sues like fa­cil­i­tat­ing land ac­qui­si­tion, quick ap­provals, cre­at­ing aware­ness, al­low­ing pri­vate sec­tor par­tic­i­pa­tion via PPP route to mod­ernise its APMCs with the help of com­mod­ity ex­changes and banks.

Vi­neet Kanau­jia

Vice Pres­i­dent - Mar­ket­ing, Saf­ex­press

Ware­hous­ing in In­dia has been evolv­ing rapidly from be­ing tra­di­tional four-walled godowns into ul­tra-mod­ern set­ups. Ware­hous­ing com­pa­nies in In­dia are rapidly in­creas­ing their ca­pac­ity, ex­pand­ing their net­work and adopt­ing new con­cepts to match up with the in­ter­na­tional stan­dards. In­fra­struc­ture is a very im­por­tant piece of the en­tire sup­ply chain. Some crit­i­cal is­sues that the in­dus­try is fac­ing are lack of land parcels, has­sles to reach the des­ti­na­tion and traf­fic speed. The In­dian gov­ern­ment should con­sider pro­vid­ing land at sub­sidised prices at strate­gic lo­ca­tions across the coun­try.

The growth and de­vel­op­ment of ware­hous­ing in­dus­try in In­dia re­quires com­bined ef­forts from the in­dus­try lead­ers and the In­dian Gov­ern­ment. The Gov­ern­ment should pro­vide a favourable en­vi­ron­ment by fund­ing fa­cil­i­ties, pro­vid­ing tax havens and ac­cel­er­at­ing the con­sol­i­da­tion of the in­dus­try. The states too should sim­plify their li­cens­ing pol­icy. The Public Pri­vate Part­ner­ship (PPP) model can also be de­vel­oped for build­ing ded­i­cated train­ing in­sti­tutes for the sup­ply chain and lo­gis­tics in­dus­try. More­over, in­crease in IT adop­tion and knowl­edge in­fra­struc­ture can pro­vide a boost to the growth and de­vel­op­ment of ware­hous­ing play­ers in In­dia.

With the in­tro­duc­tion of GST the key ad­van­tage for lo­gis­tics com­pa­nies will be the con­sol­i­da­tion of many small ware­houses to one pro­duc­tive ware­house.

Vi­neet Agar­wal

Man­ag­ing Di­rec­tor, TCI

Now more than ever be­fore, In­dia’s ware­hous­ing sec­tor has gained in sig­nif­i­cance. On one hand, com­pa­nies across in­dus­tries are wak­ing-up to the strate­gic im­por­tance of ware­hous­ing func­tions to their busi­ness. On the other, a slew of gov­ern­ment ini­tia­tives have been started to make the sec­tor more com­pet­i­tive, ef­fi­cient and cost-ef­fec­tive.

In fact, the very def­i­ni­tion of the term ‘ware­hous­ing’ is un­der­go­ing trans­for­ma­tion glob­ally as cus­tomers de­mand in­creased flex­i­bil­ity, im­proved in­ven­tory con­trol, man­age­able costs and a restruc­tur­ing of the sup­ply chain. The re­sult is a grad­ual ex­pan­sion in the port­fo­lio of ware­houses, and the av­er­age ware­house size has gone to over 60,000 sq ft. The Gov­ern­ment has been play­ing the role of fa­cil­i­ta­tor in the growth of this seg­ment. It is chang­ing the reg­u­la­tory set-up, pro­vid­ing in­cen­tives, and com­mis­sion­ing in­fra­struc­ture de­vel­op­ment projects be­sides in­creas­ing trans­parency and re­lax­ing tax struc­tures to en­cour­age the par­tic­i­pa­tion of for­eign and pri­vate play­ers in the sec­tor.

The re­sult is the com­ing-up of ded­i­cated lo­gis­tic parks and Free Trade Ware­hous­ing Zones (FTWZ). These are fos­ter­ing the growth of the lo­gis­tics mar­ket in In­dia. Pol­icy re­forms from the gov­ern­ment in­clud­ing the es­tab­lish­ment of lo­gis­tics parks in the PPP model, the im­ple­men­ta­tion of the Ware­hous­ing and De­vel­op­ment Act 2007, and rolling out of the Goods and Ser­vices Tax (GST) are added rea­sons for the an­tic­i­pa­tion of ex­pan­sion in the ware­hous­ing sec­tor.

De­spite the gov­ern­ment’s sup­port to the ware­hous­ing seg­ment, sev­eral chal­lenges are yet to be con­fronted. While the lack of suf­fi­cient phys­i­cal in­fra­struc­ture is one of the chal­lenges, a time lag be­tween de­vis­ing and im­ple­ment­ing strate­gies due to the lack of in­ter­na­tional ware­hous­ing stan­dards is another. Pro­cure­ment of land in a strate­gic lo­ca­tion with clear ti­tle and proper ap­provals is on the sec­tor wish list. This is de­spite the pres­ence of gov­ern­ment agen­cies to ad­dress the is­sue. The lack of ex­ist­ing clear land clas­si­fi­ca­tions in In­dian cities and the re­clas­si­fi­ca­tion of land are other ma­jor con­cerns as far as the de­vel­op­ment of ware­house zones are con­cerned.

Samik Chakraborty Zonal Busi­ness Head – East, Drive In­dia En­ter­prise So­lu­tions – A Tata En­ter­prise

With an av­er­age GDP growth of 9-10 per cent in In­dia, it is ex­pected that in­dus­tries like IT, tele­com, tex­tiles, food & bev­er­ages, re­tail etc. would ad­vance year-on-year as well. The sur­vival of these in­dus­tries lies on adopt­ing a ‘cus­tomer cen­tric ap­proach’ - most of the in­dus­tries have started shift­ing from stand alone to state-ofthe-art ware­houses to achieve op­ti­mum op­er­at­ing ef­fi­ciency, au­to­ma­tion, er­ror­less ex­e­cu­tion, timely stock re­plen­ish­ment and speed­ier sup­ply to mar­ket.

Hence Gov­ern­ment’s ini­tia­tive to sub­sidise tax to­wards in­vest­ment on in­fra­struc­ture and in­cen­tives for set­ting up lo­gis­tic parks, would def­i­nitely ben­e­fit all the in­dus­tries to op­er­ate with a lower cost and stay com­pet­i­tive in mar­ket.

How­ever the in­dus­try needs sup­port from the Gov­ern­ment on var­i­ous fronts to make the con­cept of lo­gis­tic parks in In­dia truly suc­cess­ful. The sup­ply chain map of many in­dus­tries may change post GST im­ple­men­ta­tion and con­sol­i­da­tion of ware­house space and re-eval­u­at­ing lo­ca­tion will be the next step for them.

Lo­gis­tic parks would be con­sid­ered an ideal lo­ca­tion by Lo­gis­tics Ser­vice Providers (LSPs) to op­er­ate multi-client ware­houses. But to of­fer speed to mar­ket, LSPs would re­quire su­pe­rior con­nec­tiv­ity of road in­fra­struc­ture. This is pos­si­ble only with ex­pan­sion of na­tional highways, bet­ter qual­ity state highways and dis­trict roads.

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