Decoding expectations of the Indian Warehousing and Contract Logistic sector from the 2023-24 Union Budget

Jan 31, 2023 India Shipping News

By Mr. Varun Gada, Director, LP Logiscience – A Liladhar Pasoo Company

In the post COVID era, the Indian logistics and supply chain sector has emerged as a significant backbone for the Indian economy and continues to be the important step to strengthening India’s position as a global economic power. A robust and cost-effective logistics and warehousing sector has become the crucial factor in global business and economic environment today and this has been one of the key focus areas for the Indian government, through its recently launched National Logistic Policy, which will be implemented on a massive scale in 2023. And while reducing the logistic cost through effective infrastructure development is also the primary objective, the goals cannot be achieved without a holistic approach towards development of the entire supply chain, including warehouses. And India’s warehousing and contract logistics is one such segment of the vital trade supply chain!

The Indian warehousing market was valued at INR 1,206.03 Bn in 2021 and is expected to grow to INR 2,872.10 Bn by 2027, expanding at a CAGR of ~15.64% during the 2022-2027 period. In alignment with the supportive government policies, including ‘Make in India’ and the ‘Digital India’ policies for business, the warehousing sector is also looking to accelerate digital adoption, embrace greener practices that match international standards, and drive value added collaborations with the manufacturing sector.While disruption through geopolitical stressors, further threatened international trade, India’s logistics and warehousing sector has emerged stronger and holds a lot of promise.

As the Indian government enhances its focus on infrastructure development and bolstering Indian exports through various schemes, the sector has certain challenges that, if addressed during the upcoming union budget, will help in the long-term growth and holistic development of the sector. These are as listed below:

1. Reduction in prices of Steel : Steel accounts for 30%-40% of the warehouse construction cost and since 2021, these prices have been skyrocketing, thanks to the global shortage and thus increasing in procurement. While several factors during and after the pandemic have been at play, this rise in price hasimpacted the warehouse automation market, particularly for fixed infrastructure solutions, where steel can account for up to 83% of the overall cost. From increasing the price of digital adoption through automation to extending the lead time of construction, steep prices of steel are a major hindrance for the Indian warehousing sector. If the upcoming Union budget can consider the reduction in Steel duty/ prices for industrial warehouse construction, it be a huge accelerator in development of smart and digitally equipped warehouses.

2. Better Road Infrastructure: The ambitious Gati Shakti plan aims to create an ecosystem that links roads and railway from the hinterlands to the ports in coastal India, as part of the National Logistic Policy. The plan includes the development of around 2 lakh kms of national highways and nearly 6,000 km of 4-6 lane national highways in the coastal regions, connecting the North-east regions of India, which has so far been disconnected, by development of 2-4 lane national highways that interlink various state capitals by 2025. This is of vital importance to the sector as currently 64% of Indian freight movement happens through roads. While the policy has proposed a 100-lakh crore outlay for road projects, its effective and timely implementation would be a key factor for the growth of the sector. It is also important to note that in consolidation with the proposed initiatives of building dedicated logistic parks closer to the ports, an improved road network will also help decongest the existing warehousing hubs, reduce rentals, and unlock better value for land available for warehousing.

3. Capital Subsidies and Public-Private Partnerships for multi-modal logistic parks: Multi-modal logistic parks have been another key focus of the GoI’s National Logistic policy and in 2021, the government also announced investment of USD 31.63 billion for the design and construction of the logistic parks, under a public private partnership (PPP) model.In lines with this, additional capital subsidies for the construction of grade-A warehouses in smaller towns and support for Public-Private Partnerships for logistic parks with better connectivity to new expressways, would ultimately help achieve the goal of reducing freight cost across the country, which are currently very high at 13%-14%, compared to other developed global economies, which are 7%-8% of the GDP.A focus on easier access to investment for industrial warehousing, including simpler processes for FDI, would also be appealing in the 2023 budget.

4. Subsidising Green warehousing: The Transport and logistic sector has been one of the major contributors to environmental pollution and thus there is an urgent need for addressing this at public policy, business and individual levels. Government interventions in ensuring affordable pricing, incentivizing/ subsidising green efforts, and laying down regulations and enforcing them, has become imperative. Steps like reduction in solar panel import duties to help reduce capex investments and a re-look at the tax structure and subsidies for environmentally responsible practices, are some of the aspects, if considered during the upcoming Union Budget, will be beneficial for the logistic and warehousing sector to not only curb its carbon footprint but to also get aligned with international business standards and win bigger global mandates.

5. Subsidies for tech adoption: While technology adoption has been a buzz word post COVID and the rise of smart warehousing has become the need of the hour, digitisation continues to be heavy investment. Easier and attractive loans/ access to funds for tech adoption and setting up smart warehouses, especially for the Cold storage and speciality warehousing segment would go a long way in accelerating the adoption of the tech-enabled solutions on a wider scale, thereby enhancing the efficacy and operational seamlessness of the entire supply chain.

In alignment with the government’s vision of ‘Atmanirbhar Bharat’ and becoming a 5 trillion Dollar economy by 2025, the above inclusions, and the mission to reduce the overall logistic costs and improve efficiencies, the above-mentioned pre-budget expectations from the sector would go a long way, if considered, in creating a robust and reliable infrastructure for trade – both domestic and international.

Author

Mr. Varun Gada, Director, LP Logiscience – A Liladhar Pasoo Company

Mr. Varun Gada is the Director of LP Logiscience, the warehousing division of the 100-year-old legacy brand, Liladhar Pasoo. Mr. Gada is a seasoned supply chain management professional with 11+ years of valuable experience and expertise in the field of contract Logistics.

Liladhar Pasoo Group is a legacy brand that has shaped the logistics sector since its inception in 1919 and has since then for the past 100 years and has emerged as a leading end-to-end logistics solutions provider and established custom house agent in India.

Mr Gada is a computer science graduate and started his career in software development, followed by the role of CEO in a start-up, before eventually joining the family-owned logistics business, with Liladhar Pasoo to head the warehousing vertical.

Under his able leadership, LP Logiscience was able to accelerate digital adoption and set up advanced warehouses, long before any other competitor, allowing them to become the partner of choice for several international brands looking to set shop in India. Mr Gada was also instrumental in the implementation of Hand-Held Terminals, Solution design, property acquisition, route mapping, etc, bringing about a radical change in the warehousing division of the Company. He is responsible for P&L and growth of the warehousing and transportation business currently sized at 3 million sq. ft of storage space and a reach of 10000+ distribution pin codes PAN India.

With his focus on tech enabled processes that leverage the best in emerging technology, Mr Gada also brought his extensive experience in Big Data and Project Management to drive market research and competitive analysis through effective data driven processes. His deep domain expertise of Supply Chain Management, 4PL – 3PL, FTWZ, Temperature Control operation and cost rationalization has brought revolutionary changes in the contract logistics business for LP Logiscience. Additionally, his early identification of the demand for specialised infrastructure has enabled LP Logisciences to gain one of the highest market shares in the warehousing business to service the niche specialty chemical market.

In fact, his integrated approach to contract logistics, which combines the tech enable processes and the domain expertise of the sector, have truly elevated the core philosophy of LP Logiscience, which believes in bringing the scientific approach to business.

About LP Logiscience – A Liladhar Pasoo Company

LP Logiscience, the warehousing division of the 100-year-old legacy brand, Liladhar Pasoo, has been driving the transformation of the warehousing sector in India since its inception a decade ago. Apart from its scientific approach to specialised storage and warehouse management, LP Logiscience is also one of the leading Indian players to adopt smart tech enabled operations and focus on building carbon neutral/ sustainable warehouses in India.

LiladharPasoo, its parent legacy brand has shaped the logistics sector since its inception in 1919, and since then emerged as India’s most experienced integrated logistics & supply chain solutions provider. Following in its footsteps, LP Logiscience has grown its warehousing and transportation business to 3 million sq. ft of storage space and a reach of 10000+ distribution pin codes PAN India within 11 years of inception. Today, LP Logisciencehas brought about revolutionary changes in the contract logistics businessto gain one of the highest market shares in the warehousing business to service the niche specialty chemical market.

They have a footprint of 20 Branches all over India. Also, with a host of tech enabled solutions, like: Integrated Warehousing Management System like Web-based, cloud integrated WMS and highly configurable system, Highly advanced logic-based put away, Efficient Forecasting Algorithms to ensure Optimal Inventory Positions resulting in Direct Cost Savings, Barcode, RFID, and voice picking enabled processes for efficient and accurate material movement. Multiple forecasting models incorporating exponential smoothing for demand spikes and drops with Advanced Warehouse location Management with configurable racks and locations to help optimal warehouse space utilization, login from any part of the world to place orders etc have made LP Logiscience a preferred partner with some of the leading global companies. Some of their key Client is as follows; – AsianPaints, UPL Ltd, Total Energies, IMCD, Pidilite Industries, Momentive Performance Material, Nivea India etc