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Can the National Logistics Policy give impetus to India’s warehousing sector?

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The National Logistics Policy (NLP) unveiled by the Prime Minister last month is aimed to facilitate the industry to reduce India’s logistics cost to single digit number, promote seamless movement of goods across the country and increase the competitiveness of Indian goods in domestic and global markets. It is a much-needed step as reduced logistics cost means a boost in overall efficiency, encouraging value addition and enterprise. To achieve the aforesaid goals, the NLP will focus on parameters like modern warehousing and world-class infrastructural development.

Alongside the NLP, the Department for Promotion of Industry and Internal Trade (DPIIT) also released the e-Handbook on Warehousing Standards. As per DPIIT, warehousing and related assets are an important segment of the overall logistics sector in the country. And in warehousing value chains, standardisation is essential for reducing costs, improving efficiency, and ensuring global compatibility as well as competitiveness.

While there are many generic infrastructure designs and operational standards published in India, awareness about applicable warehousing-specific standards itself poses a challenge before they are even applied by facility operators, owners, developers and regulatory agencies. The e-handbook on Warehousing Standards will collate existing standards and global best practices for easy reference to the sector. A team of experts from the private sector and the Logistics Division, MoCI have done extensive brainstorming to generate the e-handbook.

“This handbook is an endeavour to consolidate relevant standards as issued by concerned standard-setting agencies and to sensitise stakeholders for necessary adoption. The e-Handbook on Warehousing Standards envisages to act as an enabling and guiding document for facility developers and regulatory agencies to identify and implement facility and sector-specific standards,” said Dr. Surendra Ahirwar, Joint Secretary, Logistics & Trade, DPIIT, MoCI.

The e-handbook includes the existing standards that are issued by the standards agencies such as the Bureau of Indian Standards (BIS) and the Warehousing Development and Regulatory Authority (WDRA), and wherever there are gaps those have been identified and suggestions have been made thereof.

Dr. Ahirwar says that the majority of the warehousing market is occupied by the agri sector which, due to its pre-existing nature, is comparatively very organised. However, the major chunk of non-agri sector occupying the warehousing market is relatively unorganised due to inadequacy of infrastructure, aberrations in the distribution of warehousing infra and adoption of diverse practices.

There is an absence of standards to be referred to while creating warehousing assets, no matter the occupier, which births the need for the upgradation of existing infra or adoption of newer tech for creating such assets. “The idea behind introducing the e-Handbook on Warehousing was to enhance awareness in the industry (users as well as developers), greater formalisation in the sector, and enhanced access to secured credit from banks for developing infrastructure,” said Dr. Ahirwar.

DPIIT entered into an MoU with the Warehousing Association of India for publishing the e-Handbook for Warehousing as it was felt that it should be released by an industry body. They have also taken the responsibility to update the handbook as and when needed.

Standardisation

Speaking on the extent to which NLP will induce standardisation in the warehousing sector, Dr. Ahirwar adds, “This will at least start the thinking process – not only for developers but also government agencies involved in the development of the warehousing sector – thereby, catalysing the process of infra development. The shifting/transfer and storage stages of moving cargo from one place to another, need to be seamless. Standardisation, as an endeavour under the NLP, will make such transfer and storage, coherent and seamless.” He also said that while developing warehousing infrastructure, one would automatically look first towards the existent best practices to ensure development at the right cost and standards, ensuring optimal utilisation.

Attracting investment

The NLP, while trying to increase the competitiveness of Indian goods in the international market, will additionally also work towards attracting investment from private and foreign players. The NLP, in its spirit, will create a situation wherein the cost of production goes down, making it more viable, by reducing the logistics cost included in the production process.

Dr. Ahirwar adds, “This approach of the NLP applies to all the assets of the logistics sector, including warehousing. A virtuous cycle is what we’re trying to create. When the cost of production becomes relatively lesser, the purchasing power increases relatively. I am optimistic this will increase consumption. With this, there is greater motivation to produce more, and when you produce more, the cost of production goes down. This results in expansion of the market, which will automatically attract investment – be it domestic private investment or foreign domestic investment.”

It is not an unknown fact that numerous investors are looking at India as an alternative to China, as far as the re-alignment of the supply chain is concerned, especially for commodities like semi-conductors. They’re looking for assurance from India before they invest in the country, and the NLP (backed by Gati Shakti National Master Plan) looks at de-risking investments to a great extent.

Sustainability

“We are looking at sustainability via NLP because what is good for the environment is also good for the economy,” says Dr. Ahirwar.

Under the Gati Shakti National Master Plan, the work for the development of warehousing clusters outside city limits is already under progress. The modern warehouses to be developed under NLP will be built with the idea to minimise pollution and traffic congestion in cities. These facilities are expected to come up outside city centres so that large trucks carrying the cargo do not need to enter the city, thereby, transporting more goods compared to the smaller trucks, and also help saving fuel.

For instance, the National Highways Logistics Management System – a special purpose entity of NHAI – has already formulated a detailed plan for the proposed system and has identified the warehouses that can be shifted along the peripheral expressways and the UER (Urban Extension Region). The UER connects Delhi with Jaipur, Rohtak and Chandigarh via national highways and is scheduled to be wrapped up by August next year.

The large vehicles carrying heavy goods can deliver the payload to the warehouses in the outskirts, saving on time and fuel, as the movement of goods from these godowns and warehouses into the cities can be done by using eco-friendly CNG or electric vehicles. The initiative is supposed to, thereby, cut down large vehicle traffic as well as pollution in the cities. Similarly, for direct warehousing operations like air conditioning or temperature maintenance, solar power can be harnessed on wider basis.

Exploiting trends and technology

“Largely, the objective of the policy is to bring about a wave of automation, promoting digitisation and have more optimal ways of transit storage (which every warehouse is). For instance, instead of using reefer transportation, Phase Change Materials (PCM) will be a welcomed alternative. The shift of focus from warehousing to packaging, and solving the problem of cold chain transportation – such innovative measures will be promoted under the NLP,” says Dr. Ahirwar.

His advice to warehouse users, developers and operators is that they should always remember 4Ds when it comes to warehousing:

  • Diversification within and across the warehousing ecosystem
  • Decentralisation of facilities, moving towards Tier-2/3 cities
  • Digitisation of operations
  • Deflating margins to facilitate better investment decisions

To conclude, while the NLP focuses majorly on flipping the transportation ecosystem, warehousing and other allied services are also a part of the agenda. The government is focussed to make a move in the right direction with a holistic approach towards infrastructural development. In that sense, India’s warehousing sector will – most possibly – not be left behind.

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