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:

1. Remove deficiencies related to logistics
2. Draw the associated costs down, and
3. 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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