It’s a sector associated with inefficiency, with logistics costs accounting for 13-14% of India’s GDP, as against 7% in most developed economies. This scenario is set to change, with technology and investment transforming warehouses from godowns to IT-enabled depots that can ensure seamless distribution.
In the process, the average size of a warehouse has increased from around 20,000 sq ft to 2-3 lakh sq feet. Cumulatively, the total warehousing space is estimated to grow from the present 900 m
sq ft to 1439 m sq feet by the end of 2019. Says Prabal Basu, CMD, Balmer Lawrie & Co, a mini-ratna PSU, “the Indian warehousing industry, estimated to be worth around `50,000 crore at present, is growing at an average 10% per annum.”
While 15% of the industry deals with agriculture and horticulture products, cold storages command 16% of the warehousing space. Industrial and retail players account for 55% of the space and inland container depots (ICDS) and container freight stations (CFS), dealing with export-import goods, enjoy a 14% share, according to a CII logistics report.
In an indicator of the sector’s potential, annual investment in warehousing has averaged `17,000 crore in the last five years. A PSU like Balmer Lawrie, slotted for privatisation, is redeploying its land assets to streamline operations. Under a plan prepared by PWC entailing an investment of `250 crore, it is developing two more cold storage chains and three temperature-controlled warehouses and three general warehouses – each with 3,800 tonnes of storage facility—besides a multi-modal logistics park at Visakhapatnam, Basu points out.
Technological upgrade is a part of such investments. It is innovations like automatic identification and data capture (AIDC), Real Time Locating System (RTLS), and Radio Frequency Identification that have allowed the rise of e-tailing in India and the creation of a value chain that extends from raw materials to consumer satisfaction.
In a fast-growing economy, the sector has to be ready for new developments. A case in point is the Centre’s direct port delivery scheme which hit operations of CFS. The scheme was aimed at delivery of containers within 48 hours of a ship docking at port, obviating the need to stack them at CFS. It was also supposed to free ports of congestion. However, the scheme failed due to the lack of adequate capacity at ports to stock cargo. The dumping of the scheme has led to a revival of business at CFS.
According to a Knight Frank report, manufacturing is the driver of warehousing in India. With the introduction of GST nearly ending the need for captive warehousing, warehousing facilities are being offered as a shared space to multiple clients, facilitating the sector’s growth as an independent vertical rather than a back-end business. But, as Dr Bikram Sarkar, former Kolkata Port Trust chairman, points out, the growth of the industry is linked to the country’s infrastructure. In an age of lean manufacturing, warehouses need to function like distribution channels. Such seamless operations are hinged on quality road, rail, waterway and aviation infrastructure — for instance, truck productivity needs to go up to at least 350 km a day from the present 200. Only with further improvement in road infrastructure and smoothening of traffic at toll plazas can Indian warehousing reach developed world standards, says Akash Bansal, business head of Om Logistics.