Road Min, NHAI to set up warehousing zones to reduce logistics cost

Gadkari is believed to have proposed Nagpur's name for setting up country's first logistics park

In a bid to ease transportation and reduce logistics cost of companies by about half, the Central government is firming up a proposal to set up warehousing zones, along with a private partner, on the outskirts of major cities.

Road ministry and the National Highways Authority of India (NHAI) are working on the proposal to set up logistics parks. NHAI made a presentation to the ministry on the need for engaging a consultant to set up logistics parks announced in the Budget, sources said.

They would be warehousing zones on the outskirts of the cities and storage facilities would be set up outside the main cities in order to reduce pressure on city traffic. NHAI would be the implementation agency for such parks that can bring down the logistics cost by about 50 per cent, an official told Business Standard.

Union Road Transport Minister Nitin Gadkari is believed to have proposed the name of Nagpur, his hometown and also his Lok Sabha constituency, for setting up the country's first logistics park.

Finance Minister Arun Jaitley in his Budget speech said, "An effective multi-modal logistics and transport sector will make our economy more competitive. A specific programme for development of multi-modal logistics parks, together with multi-modal transport facilities, will be drawn up and implemented."

These parks, to be built on PPP (public-private-partnership) mode, would benefit companies in the FMCG, steel and cement sectors the most, sources said.

Currently, the goods carrying capacity of Indian trucks is one-third of China and one-fifth of USA. With these parks planned on the outskirts of major cities, the capacity of trucks can be enhanced from the current 12 metric tonnes as higher capacity trucks would no longer enter the main city and the roads would be free of heavy traffic.

India also lags behind China and USA in terms of logistics performance mainly affected by inadequate road network and loss during transportation, experts said.

According to official estimates, logistics market in India is expected to be worth $307 billion by 2020.

At present, India spends around 14.4 per cent of its GDP on logistics and transportation as compared to less than 8 per cent spent by the other developing countries.

The Cargo and Logistics Industry in India can expect to grow at CAGR (compounded annual growth rate) of 16 per cent in the coming years with inflow of new investments that in turn will create new opportunities for the logistics sector.

Transportation sector plays a key role in the logistics department as 57 per cent of the goods by volume are transported by roads, according to industry estimates.

Storage and warehousing is another driver of the logistics business and based on the type of goods can be categorised into five heads - industry/retail, liquid storage, agriculture, cold storage and container storage.