How Warehousing Policy Will Reduce Logistics Expenses

What to expect from the new policy?

The new policy aims to improve logistics across the country. It aims to reduce pollution and traffic congestion in major cities. Modern warehouses will have cold-storage chains and will be able to store all types of cargo—wet and dry. These facilities are expected to come outside city centers so that large freight trucks do not need to enter the city to unload their cargo. This will also help in promoting bulk carrying capacity and save fuel. These larger vehicles can transport more goods than the smaller trucks that we are used to seeing in cities.

Who will formulate and implement the policy?

The policy will be framed by the National Highways Authority of India (NHAI). It will also be the implementing agency. There are land banks along the country’s highways and expressways along the NHAI. Tenders will be floated for such land parcels, inviting private companies to develop warehousing zones on revenue-sharing basis or in PPP mode for a fixed fee. The terms of the agreements will be finalized later. The proposed warehousing zones are part of the government’s initiative to reform the transport sector, which is responsible for the movement of goods across India.

What will be the impact on logistics cost?

Warehousing zones will help cut logistics cost of India, which accounts for 14%-16% of gross domestic product (GDP), while China accounts for 8%-10% of GDP and the US 12%-13% . Warehousing Zones and Multi-Modal Logistics Parks (MMLPs) are being set up by NHAI. Warehousing zones will help FMCG firms, steel and cement manufacturers to stock inventory near major centres.

How will MMLP help in warehousing policies?

The integration of multi-modal transport includes the development of 35 MMLP. It aims to address logistics-related gaps, reduce associated costs, and strategically integrate highway projects and other connectivity initiatives such as inland waterways and railways with the freight delivery ecosystem. The objective of the MMLP is to promote inter-modal connectivity through dedicated railway lines and to provide access from highways to airports or seaports or inland waterways terminals.

Which sector is driving the demand?

The e-commerce sector is driving the demand for logistics and warehousing in the global markets and has emerged as the most prominent driver of the Indian warehousing market volume along with the third party logistics sector. The sector’s share in transactions has increased from 18% in FY2017 to 31% in FY2011. The Indian e-commerce market is in its next phase of growth with Reliance Industries Limited and the Tata Group entering the fray. Thus far Amazon.com Inc. and Walmart Inc. has pushed the market forward.