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A complex domestic supply chain mechanism meant that most products are fatigued
before they reach consumers in India. A logistics park could facilitate the co-location of
value added service providers. Even final
assembly could happen within the park. A logistics park would thus facilitate (i)
economies of scale, scope and co-location, (ii) efficiency in transportation by way of
integrated, multi-modal access, (iii) light manufacturing
activities, (iv) co-location of value added service providers, and (v) reduced inventory.
The essential components of a logistics park are (i) suitable location (ii) rail terminal (iii)
air cargo complex (iv) intermediate container terminal (v) warehousing (temperature
controlled and ambient) (vi) value added logistics services (vii) food processing zones
(viii) open stocking yards, (ix) ancillary production, etc.
Logistics park also create community and economic benefits, such as, (i) reduced
pollution (ii) single window clearances (iii) greater industrialization (iv) focused
environment management and (v) greater use of environment-friendly rail systems.
To achieve this, the logistics players should engage in detailed location strategy studies.
PPP is the preferred route for building logistics parks. Government should facilitate this by
easing land acquisition norms, broadbase basic infrastructure, provide tax incentives,
promote industry clusters, etc. And, the nodal agencies should promote intermodal
transportation.
Logistically friendly countries are more likely to have better global value chain integration
and attract export-oriented FDI. Since trade and FDI are the key channels for the
international diffusion of knowledge, poor logistics may impede access to new technology
and know-how and slow the rate of productivity growth.
Overview
• The Indian logistics industry accounts for a mere 2% ($100 billion) of the $5,000-
billion global logistics industry
• In India, majority (65% to 70%) of the products are still transported by road and
only 30 to 35% by rail (primarily EXIM and bulk products)
• Owing to general inefficiencies, logistics is a high-cost activity in India (13% of
GDP) compared to 8-9% of GDP in the US.
• The country has the second largest network of roads (3.83 million km after US’s
6.43 million km), the fourth largest rail network (63,000 km), 128 airports, 12
major ports, 1 corporate port and 187 non-major ports.
• Investment in the logistics infrastructure has been raised from $201 billion under
the 10th Plan to $492 billion under the 11th Plan
• The domestic logistics industry is growing at 8-10% per annum and is expected to
reach a size of $385 billion by 2015
• The warehousing segment which makes up 20% of the logistics industry is
dominated by small players with limited capacity. This segment is expected to
grow from $20 billion now to $55 billion by 2011, constituting then about 35% of
the total logistics industry in India and by that time it would have in excess of 50
million sq ft Warehousing space and more than a hundred Logistics Parks across
the country
• 110 logistics parks are slated to come up across the country in the next five years,
covering 3,500 acres at an estimated cost of about $ 1 billion. Thus about 45
million sq feet of additional warehousing space is expected to be developed across
the country. This will be aided by privatization of ports, opening of dedicated
freight corridors, roads development, improved and enhanced ports handling, etc
• Logistics account for 15-25% of cost of goods in India compared to 10-15% in the
West
• The resulting high cost of operations due to general inefficiencies is causing an
estimated loss of $50 billion to the national economy
• The 3PL activity is less than 10% of the total logistics operations in India, whereas
the corresponding figures for the U.S., Europe and Japan are 57%, 40% and 80%
respectively
Performance / Constraints
• India ranks 39th in the World Bank logistics performance index that covers 150
countries. The inefficiencies in the logistics industry stem from (i) a fragmented
market (ii) multiple taxes (iii) physical infrastructure bottlenecks (iv) archaic labour
laws, and (v) state-centered policies
• National highways that form 2% of the total roads carry 40% of the traffic
• The industry is hampered by high transaction costs, more time taken in processing
exim containers (12-13 days compared to 3-5 days in France and Denmark),
excess documentation (an average 11 documents compared to 2-3 in France and
Singapore), and high cost of handling exim containers ($2,600-3,000 compared to
$440-450 in Malaysia and Singapore)
• The average speed of commercial vehicular movement in India is a mere 20
miles/hour compared to 60 miles/hour in the West
• In the absence of modern warehousing practices, there are regular slippages to the
extent of 15-25% of cargo business
• Key issues to be addressed are: (i) land acquisition practices, (ii) approvals, (iii)
zoning, (iv) investor approach, (v) user expectations (vi) design, and (vii)
development
Growth
Performance evaluated using a 5-point scale (1 for the lowest score, 5 for the highest).