From UPSC perspective, the following things are important :
Prelims level : Not much
Mains level : Logistcs and Supply chain management in India
In order to reduce transportation and logistic cost, the union government along with the National Highway Authority of India (NHAI) is working on warehouse policy.
What are Warehouses?
- A warehouse is a building for storing goods.
- Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc.
- They are usually large plain buildings in industrial parks on the outskirts of cities, towns, or villages.
Objectives of the New Warehousing Policy
- Logistics boost: The new policy is aimed at improving logistics throughout the country.
- Supply chain management: The modern warehouses will house cold-storage chains and will be able to store all kinds of cargo—wet and dry.
- De-congesting 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 to unload their goods.
- Fuel efficiency: This will also help boost bulk carrying capacity and save fuel.
- Curbing air pollution: The idea is to minimize pollution and traffic congestion in major cities.
Who will frame and implement the policy?
- NHAI: The policy will be framed by the National Highways Authority of India (NHAI). It will also be the implementing agency.
- Through Land Banks: There are land banks along the highways and expressways of the country with the NHAI.
- PPP mode: Tenders will be floated for such land parcels, inviting private players to develop warehousing zones in PPP mode on a revenue-sharing basis or for a fixed fee.
What will be the impact on logistic costs?
- Logistics cost-saving: Warehousing zones will help cut India’s logistics cost, which is 14%-16% of gross domestic product (GDP), compared to 8%-10% of GDP in China and 12%-13% in the US.
- Establishment of MMLPs: The warehousing zones and multi-modal logistics parks (MMLPs) are being set up by the NHAI.
- FMCG sector boost: This will help Fast-moving consumer goods (FMCG) firms, steel and cement makers stock inventory near major hubs.
How will MMLPs aid warehousing policies?
- Integration of multi-modal transport includes the development of 35 MMLPs.
- The MMLPs are aimed at fostering inter-modal connectivity through dedicated railway lines and access from highways to provide connectivity to an airport or a seaport or an inland waterway terminal.
- The aim is to:
- Remove deficiencies related to logistics
- Draw the associated costs down, and
- Strategically integrate highway projects and other connectivity initiatives
Why such move?
Ans. E-commerce boom
- The e-commerce sector has been driving the demand for logistics and warehousing across global markets.
- It has emerged as the most prominent driver of Indian warehousing market volumes along with the third party logistics sector.
- This sector’s share in transactions has grown from 18% in FY17 to 31% in FY21.
- The Indian market is on the verge of its next phase of growth with domestic groups such as Tatas and Reliance entering the business.
- Thus far, Amazon.com Inc. and Walmart Inc. have driven the market.