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.
How?
- 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.
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