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According to the CW report, Mumbai is emerging as the preferred location for the development of logistics parks. With an investment of US$200 million (Rs100 crore), development of around seven to eight logistics parks on approximately 600 acres of land in Mumbai is already planned.
The other cities that fall within the established locations include Kolkata, Chennai and Hyderabad. These locations are characterised by excellent port, rail and road connectivity and are witnessing significant investment in infrastructure. High concentration of organised retail, established manufacturing hubs and proposed SEZ developments further augment the appeal of these locations.
“Since almost a third of the total realty development in the sector is expected to take place in emerging locations, such locations that offer good connectivity to multiple markets will witness increased activity from logistics players,” says Sanjay Dutt, joint MD, Cushman & Wakefield India.
The demand for warehouses is also expected to accelerate further due to the increase in foreign trade and the upcoming Maha Mumbai Special Economic Zone, while warehouse rentals are expected to increase by 15-20% over the next two years.
The report points out that Nagpur, Vizag and Gurgaon are currently lagging in support infrastructure but are promising logistical hubs. This is because they offer high ratings on other parameters such as location, existing and proposed manufacturing clusters and SEZs. There are many developments taking place in these locations which will increase their attractiveness over the next five years.
The report also mentions that alternate locations including Bengaluru, Indore, Alwar, Jamshedpur, Ahmedabad and Ambala are going to be developed as potential logistics hubs.
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Regulatory moves
Providing a much-needed shot in the arm to this fledgling sector is the government’s decision to adopt a regulator to oversee its functioning by Q1 2009. Speaking at a recent seminar on warehousing at Kolkata, BB Pattanaik, chairman and managing director, Central Warehousing Corporation (CWC) said, “Within 30 days of the notification of the Act, warehouses will have to register with the regulatory authority. The government is in the process of selecting a chairman and two members.”
The Warehousing Development & Regulatory Authority (WDRA) has been proposed in the Warehousing (Development & Regulation) Act, 2007. The WDRA will register and accredit warehouses intending to issue negotiable warehousing receipts and have in place a system of quality certification and grading of commodities to protect the interests of holders of warehouse receipts against negligence, fraud and other malpractices.
The 11th Plan aims at a 4% growth in crop production, but industry experts believe that farmers need efficient warehousing facilities to achieve the target. “They should be able to hold on to their stocks and sell when the prices are high,” states Akhilesh Prasad Singh, Union minister of state for consumer affairs, food and public distribution.
Importantly, negotiable warehouse receipts issued by warehouses registered under the Act, will help farmers avoid distress sale by ensuring finance against their produce. There are about 495 warehouses under the CWC with a storage capacity of 100 lakh tonnes, while the 17 state warehousing corporations have another 1500 warehouses with a combined capacity for 200 lakh tonnes.
While the future of the warehousing and logistics sector in India looks buoyant, it might be a little premature to uncork the champagne just yet. Logistics cost in India at about 13% of GDP is much higher than that in the US (9%), Europe (10%) and Japan (11%). According to a report by FICCI-Ernst & Young, the average time to clear cargo at ports is about 19 days in India, against three to four days in Singapore. Moreover as compared to some European countries, rail transportation in India is almost 3.5 times more expensive and the average transit time by road three times higher.
While these are key issues that need to be examined, India appears to be well on course to witness accelerated growth in this sector over the next 5-7 years riding on the back of favourable tax regime, increasing trade and emergence of organised retail.
The nationwide infrastructural developments that include dedicated railway freight corridors, road development projects and the modernisation of 37 operational airports are likely to augment India’s handling capacities significantly, thereby enhancing its logistical performance in the years ahead.
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