Even as the industrial and manufacturing sectors felt the heat of the slowdown in the last few months, it wasn?t the case with logistics?a key segment in the services sector?that is dependent on the above two. It has had a comfortable ride through the turmoil. And as the liquidity situation improves and markets recover from months of agony, the $100-billion or Rs 4,70,000-crore logistics business in India is set to boom.

Players are lining up expansion plans at a time when most others in allied industries would rather wait and watch. Quite clearly these plans are in anticipation of business that is likely to flow as the economy slowly but steadily makes its way out of the recession triggered by a financial meltdown in September last year.

But there are other key reasons for this spurt of activity, say logistics players. The big one being the imminent phase-out of the current tax regime and the introduction of the goods and services tax or GST as it is popularly called by March 2010. This, say players, is likely to create a favourable environment for the logistics business especially in the warehousing segment, estimated to be $20 billion or Rs 940 crore in size, which is growing at a rate of about 14% per annum.

The emergence of logistics parks as well as the focus on warehousing, say players, is likely to boost third-party logistics?something these companies are into.

The time, say veterans, is just right to expand existing capacities. Most companies are doing it without haste.

Logistics players are looking to add capacities in road, sea and air freight. Take, for example, the Bombay Stock Exchange-listed Transport Corporation of India Limited (TCIL). The Rs 1,500-crore company owns and operates 1,200 trucks and trailers. TCIL, for the record, has set aside Rs 160 crore towards capital expenditure in this financial year.

Vineet Agarwal, executive director of the company, explains, ?Of the Rs 160 crore, Rs 100 crore will be for the acquisition of new ships.

The remaining Rs 60 crore will be distributed between warehousing, increasing our hubs in the east and west of the country and replacing old trucks.?

Another player Safexpress, on the other hand, plans to devote its attention on increasing its warehousing capacity. It is also focused on logistics parks?something the company believes could give it a leg-up in the business.

Says Vineet Kanaujia, general manager, Safexpress, ?We realised that warehousing would witness a boom going forward, which is why we?ve been targeting huge additions to our capacity in the segment. This is bound to help when the market eventually opens up.?

The numbers that Kanaujia rattles off are big indeed. Safexpress is looking to double its warehousing capacity to 100 lakh sq ft in the next few years. The company has already launched logistics parks in Gurgaon, Nagpur, Ahmedabad and Kolkata. A fifth one is in the pipeline in Chennai, with seven more targeted in this year.

Says Kanuajia, ?We are looking to spend about Rs 600 crore on logistics parks in the next two years. These are big parks we have in mind. Like the Nagpur Park, for instance, is spread over 11.9 lakh sq ft. This is the largest facility in the country, not to mention that it is state-of-the-art.?

Incidentally, when most other players in allied sectors blamed the slowdown for a mess in which they were, logistics companies had nothing but the latter to thank. The current buoyancy to a certain extent is on account of the slowdown that the economy witnessed, which pushed companies across the board to focus on improving efficiencies.

?Rather than laying off people or scaling down their expansion plans, many companies felt that efficiencies could be improved across the production and distribution chain. Managing supply chain in other words would help bring down overheads and improve efficiencies in general. Many companies focused their attention on it giving a fillip to the supply chain and logistics business in the process. The whole emphasis on third-party logistics today has gone up. We have nothing but the slowdown to thank for this,? says Kanaujia.

Says G R Gopinath, erstwhile chairman of Air Deccan, who is now spearheading an air cargo and express logistics venture called Deccan Express Logistics; ?There is no denying the opportunity that exists in the business.?

This point is reiterated by Yogesh Dhingra, finance director, Bluedart Express. He says, ?Avenues of growth do exist. There is no denying that.? It?s the reason why both Deccan and Bluedart have quite a few initiatives in the pipeline to take advantage of the opportunity at hand.

Says Gopinath, ?We have invested about Rs 1,000 crore in the business. Deccan 360, the brand name of the service we are promoting, aims at connecting small towns with the big cities. We are trying to create a modern supply chain where none exists. This is going to be a challenge. But I think we can do it if we apply our minds to it.?

Deccan 360, which has three Airbus 310 planes at the moment and is looking to add five ATRs to its fleet in the future, has already begun the process of connecting small towns with big cities. ?Being able to move around and connect is at the heart of the matter. That is the strength, the power of a logistics network. By next year, Deccan 360 will be in 75 cities across the country. Nagpur will be our hub and we will provide end-to-end logistics support to our customers. So not only does it mean ferrying goods via air but also road. Of course, we have to focus on our warehousing capacity,? says Gopinath.

So Deccan 360 will complement its fleet of planes with a fleet of trucks and have warehouses at the backend. ?The plan is to have a fleet of 400-500 trucks that connect the hinterland of the country with warehouses at various locations,? says Gopinath.

Bluedart, in contrast, is investing one-tenth of what Deccan is this year, but that is because the company is a well-established player in the business. Bluedart, says Dhingra, spent Rs 200 crore last year in ramping up infrastructure, inducting a Boeing 757 freighter plane and opening up an integrated facility at the Bangalore International Airport alongwith DHL.

Says Dhingra, ?The new facility has considerably improved our operational efficiencies in the South, helping us in synergising our activities with DHL. We?ve also invested in new warehouses across the country to help in our operations.?

About Rs 100 crore has been lined up this year. It will be utilised in improving Bluedart?s ground express abilities specifically in surface hubs apart from new retail counters in different locations. ?We always looked at what our customers want. There is no point in making blind investments. That is a waste of money,? says Dhingra.

The company has launched a slew of products in the last few months ? all aimed at improving its express logistics solutions in general. ?This business is too competitive. You can?t ignore customer needs,? says Dhingra.

While opportunities abound, there are roadblocks as well. These bottlenecks stretch from infrastructural issues to red tapism to lack of industry status. What hurts the most though, say players, are infrastructural bottlenecks that simply bring down the capacity of players to ferry goods, thereby hampering business in general. This eventually mars topline and bottomline. ?It is indeed hurting when the road and port infrastructure are not up to the mark. We have to contend with this all the time,? says a player on condition of anonymity.

Says Agarwal of TCIL, ?A major component of logistics is road cargo. But there are issues here with inefficient highways, multiple stops and no uniform permits. The concept of transport nagars has also not been developed properly. On the ports side, infrastructure is inadequate. Besides, evacuation facilities are not enough.? Says another insider, ?The business is suffering because there are no integrated policies. If I have to move cargo by road and rail, I am essentially crossing two ministries. Can I have seamless service then? Can I guarantee delivery on time? When you start multimodal transport, an integrated policy is a must. Otherwise we will lose out in the process.?

The lack of industry status, many feel, is the route cause of the pain felt by players.

?With industry status, says Kanuajia of Safexpress, ?things will come into perspective. The business will be taken seriously. Remember a substantial part of the economy is dependent on the logistics sector. We have top corporate houses as our clients. The sector has wide implications on the economy.?

Indeed, it?s rightly said that the health of the logistics sector in a sense serves as a barometer for the economy.