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Journalism of Courage
The future of mega warehousing in India is running into an all-too-familiar cul-de-sac. With large tracts of ‘clean’ or clear-titled lands largely unavailable at competitive rates, and with the Government hesitant to facilitate the acquisition process after burning its fingers in recent SEZ debacles, logistics players are quietly scaling down their mega ambitions.
Indo Arya, a leading logistics service provider, kick-started the year by deciding to open hi-tech warehouses spread over 50 acres in each of the metros. It has since moderated its plans, and is now settling for hubs sized between 5 to 20 acres. “We are keen to increase the size of our warehouses and would be happy to operate even 100 acre hubs. But where is the land?” asks Indo Arya director Yogesh Arya. The Rs 250-crore company’s hi-tech warehouse at Hassangarh in Haryana, the largest in the country, is also a watered down version of its earlier plan. While it had intentions of purchasing at least 35 acres to construct the facility, lack of availability and ensuing time overruns ensured that it settled for the current 23-acre area. In Kolkata, where it plans to erect a mega warehouse over 25 acres, the wait has been one year. And running.
A telling example of the extent of the problem is the experience of ProLogis, a US-based forerunner in supply chain distribution services. The firm, whose customers include biggies like Wal-Mart and Adidas, ventured into India last year to primarily service major global clients in the country. Fourteen months on, the company is yet to make any headway in procuring a 100-150 acre plot for its mega-warehousing plans, prompting country head Dan Marcus to remark, not half-jokingly, “If you ask me what we’re doing here, I would say, I’m wondering the same.”
For most logistics players, issues of land acquisition stem from multiple holding of agricultural land and lack of undisputed titles. The process of converting agricultural land into that suitable for commercial consumption is also a long drawn-out one, often fraught with bureaucratic delays. “The ideal option is for the Government to acquire land and give it to us. We are willing to pay a premium for such clean land,” says Arya. “But the Government, especially the state industrial development corporations, are not cooperative. They prefer acquiring land for manufacturers, but not for transport and logistic players. There is no excise and sales tax to be made from us.”
Marcus adds, the major problem arises from lack of land ‘zoning’ in India. “Abroad, there are different lands earmarked for different purposes — at different rates,” he says. “Here the same land is being vied for by industries, housing complexes, and us. Obviously, land becomes unaffordable for warehousing requirements.” As land becomes a choke point, the aim of such large consolidated warehouses, namely to make the most of withdrawal of central sales tax, is likely to be defeated. Customers of these logistics providers, particularly retail, FMCG and auto firms would have to find new distribution models that meet land constraints.
Like Reliance has. Explained Reliance Retail president and chief executive (operations & strategy) Raghu Pillai, “Our business model is devised so that we have our own distribution networks, which includes better inventory management and our own private warehouses. If big warehouses don’t take off, we don’t get impacted.”
Warehousing Woes
•Mega warehousing checkmated by land acquisition problem
•Logistics players like Indo Arya scaling down mega plans
•Instead of 50 acre warehouses in each metro, company settling for 10- 20 acre plots
•MNC ProLogis forayed into India 14 months ago; yet to find a 100 acre plot
•Big retail, auto, FMCGs’ logistics requirements may take a hit
