Freight traffic across road, railways, ports and air has been growing at double-digit rates in the country. Over a last few years there has been a flurry of activities by various local and global players in planning and establishing logistics parks. The logistics sector in particular has been growing at an impressive rate of 8% to 10% per annum since 2002 to touch revenues of $100 billion in 2007-08.

The warehousing activities alone hold 20% of the total $100 billion industry and expect to touch $55 billion by 2010-11 from $20 billion level of 2007-08, Confederation of Indian Industry (CII) said in its latest study. Over the next five years approximately 110 logistics parks and 45 million square feet of warehousing space is expected to develop across the country, it added.

CII?s Institute of Logistics found that while many strive towards setting up logistics parks, there has been number of pitfalls which not only hamper the growth prospects but also delay the prospects of involving overseas players into developing logistics parks with multi-billion dollar investments.

The pitfalls include incorrect positioning, misinterpretation and abusing the concept of logistics parks, its location, improper planning, poor service and lack of a proper regulatory environment for borderless movement, the study said.

The major factor which dampens the multi-modal logistics growth is that the costs in the country are high at 13% to 14% of GDP as compared to 8% to 9% for developed countries. At a GDP of one trillion this represents an excessive cost of $50 billion, clearly signalling the supply chains in India are inefficient and logistics need to be revamped, the institute pointed out.

The annual logistics cost in the country is estimated at $100 billion. Out of this over 95% is accounted by the unorganised sector such as owners of less than 5 trucks, affiliated to a broker or a transport company, small warehouse operators, customs brokers, freight forwarders. Slightly more than 5%, that is approximately $5 billion is contributed by the organised sector. Majority of the warehouses are small, outdated with only basic material handling systems and are typically godowns. The transporters? fleet are typically small, old and inefficient resulting in higher cost of transportation.

On the other side, the road transportation accounts for more than 60% of inland transportation of goods and highways that constitute 1.4% of the total road network, carry 40% of the freight movement by roadways. Similarly, the supply chains in India are distorted and sub-optimal as they are aligned to minimise the taxation such as central sales taxes (CST), excise duty, service tax and due to erstwhile licensing policies. Poor service standards and lack of reliability in transportation and procedural delays further put stumbling block in the growth of multi-modal logistics.

Providing a world-class standards and a professional environment will drive significant growth in freight movement across road, railways, port and air. It is estimated that the road traffic is estimated to grow from 2,466 mt in 2007 to 3,700 mt by 2013. The rail freight is likely to touch 1,100 mt by 2012 from 2007 level of 727.75 mt. Similarly, the traffic at the ports is expected to grow at a significant pace from 458.21 mt to 961.55 mt by 2013 and the air cargo, a smaller portion of freight traffic in the country, is expected to grow sharply from 1.6 mt in 2007, the study said.

The growth in traffic across the country is fuelling the demand for modern logistics centres and warehouses to enable efficient movement, storage and distribution of freight from the production point all the say to the eventual consumption point.

The guiding principles for encouraging more investments to set up logistics parks include:

* Developing a clear value proposition of potential logistics savings for the customer.

* Identifying the appropriate location of the park.

* Conducting a detailed analysis of the catchment area and the demand potential.

* Providing seamless multi-modal transportation solutions.

* Providing flexible options for the customer in terms of financing and space planning.

* Ensuring all the basic amenities made available.