Since coming to power, the Modi government has continually demonstrated an avowed commitment to propel the country’s infrastructure sector on a constantly rising growth curve. To remove structural rigidities in the infra sector and build efficiencies and resilience in its functioning to position it as a key driver of economic growth and expansion, the government has introduced a slew of policy reforms and interventions.
Providing a huge boost to the logistics industry, Finance Minister Nirmala Sitharaman made a strong case for setting up a robust warehousing network on a Pan-India level in her maiden budget speech in February 2020.
Conventionally speaking, warehouses are not viewed as a financially viable investment option by private sector players as they are typically characterized by long gestation periods. Also, for a large number of private sector players with little or no access to corporate debt financing options, there is widespread reluctance to invest in capital-intensive projects like warehouses which do not guarantee an attractive internal rate of return (IRR). To bridge this gap and encourage large-scale participation from the private sector in setting up warehouses, FM Sitharaman in her budget speech proposed the provision of viability gap funding (VGF) scheme. It would be administered by the Ministry of Finance to set up warehouses at the village and taluka level in the country.VGF has been designed as a one-time capital subsidy grant and risk mitigation tool to provide assurances of guaranteed returns to private sector players and ensure their participation in projects which might be otherwise considered as commercially unviable.
For private sector companies wanting to invest in constructing large-scale Grade A warehouses in tier 1 and 2 cities and the rural hinterlands of the country, stringent land acquisition norms pose a major operational challenge. It is in such cases that the government should play the key role of a facilitator and mediator to ease development control regulations and ensure speedy land acquisitions and environmental clearances for interested private sector players. The government should assure the participants through written guarantees that the land acquired for setting up warehouses is not mired in any issues like litigation on the title and is free of mortgages, liens and encumbrances. Government departments should also take the lead in helping developers to evaluate the environmental impact of a warehousing project through Environmental Impact Assessment (EIA) procedures. This will help the developers avoid the unintended consequences of environmental violations and ensure that the warehousing project complies with stated environmental compliances.
Concerned government departments and agencies should ensure that the land where the warehouse would be constructed is located in areas where warehousing activities have been allowed and has the requisite connectivity to emerging transport corridors and centres of production and consumption. The implementation of a seamless and simplified land acquisition system, which is bereft of bureaucratic hassles and procedural bottlenecks, holds the potential to encourage an increasing number of developers to make large-scale investments in setting up warehouses in the country’s small towns and villages. This will not only optimize the cost of operations for logistics players but also lead to supply chains becoming more efficient and streamlined. The government should also focus on reviving Special Economic Zones (SEZs) in proximity to ports and incentivize private developers to set up warehousing facilities thereby providing them with special tax holidays and rebates.
As small towns and villages become the centre of warehousing activity, developers will feel the need for skilled and trained manpower to carry out various functions like inventory management, processing orders, packaging and grading. With e-commerce reaching a new peak in the wake of a large number of people in semi-urban and rural areas engaging in online transactions, warehouses in such areas can perform the specialized tasks of fulfilment centres. These can provide large-scale employment to local populations with warehouse developers needing to take the onus of training them and equipping them with the right skill-sets to execute their duties and responsibilities.
Concerned stakeholders like government agencies and logistics companies must synergize their expertise and resources in bridging the skill gaps in Indian logistics. Supply chain players should take proactive measures to set up Skill Development Centers (SDCs) approved by the National Skill Development Corporation (NSDC) to boost employability opportunities for underprivileged youth in the country’s exponentially growing logistics sector, especially warehousing. Policymakers and corporates should cooperate regularly to create customized learning programs for warehousing managers with an emphasis on strengthening their capabilities and efficiencies in managing future warehousing supply chains.
As Warehousing Management Systems become more complex and new areas of specialization emerge within core operational processes, logistics players will need to constantly upgrade workforce skill levels through industry-specific training courses. Gainful public-private partnerships should consistently focus to build a sustained talent pool of qualified warehousing personnel for driving the functional competencies of Indian logistics and giving it a distinct competitive edge in the global arena.