Challenges and Implications of Storage Capacity (warehousing) in India

J.Joshuva Alexander, Jindal Global Business School, Sonipat, Haryana.

(E-mail: jos237@gmail.com, Mobile: +91 8053464429)

Warehousing, the most important auxiliary service for development of logistics industries in India also plays a critical role in developing economy of a country.The growth potential of warehousing sector is huge and it is expected to grow at a rate of 30% to 40% per year. [Sanjay, 2011]. Warehousing plays a crucial role in supply chain in sorting and handling the commodities and helps to bridge the demand gap from supply of goods to on time for the products to reach the customer. It helps to sustain in scarcity or in high demand period. The warehousing capacity available in India, in public, cooperative and private sector is about 108.75 million MTs (Planning commission of India, Twelfth five year plan). Storage facilities in India are provided by Central warehousing corporation, State warehousing corporation, Cooperatives and private.  [Dr. D.P. Patra, Jt. General Manager (Mktg) IFFCO]. The planning commission of India given the storage capacity of different warehouses sectors in India in the twelfth five year plan is as follows:

 

S.No.	Name of the Organization /Sector	Storage Capacity in Million MTs
1.	Food Corporation of India (FCI)	32.05
2.	Central Warehousing Corporation (CWC)	10.07
3.	State Warehousing Corporations (SWCs)	21.29
4.	State Civil Supplies	11.30
5.	Cooperative Sector	15.07
6.	Private Sector	18.97
Total		108.75

Table 1: Storage capacity in India (Source: planningcommission.nic.in)

 

 Warehousing has been typically dominated by small players with common issues like small capacities and poor deployment of handling, stacking and monitoring technologies. Government run warehouses are in even poorer conditions with overstocking, lack of maintenance and obsolete technologies when observed in the present scenario. Other fact that has affected both the location as well cost of operating a warehouse has been the “octroi tax”. Other factors that challenges the growth of warehousing in India are:

1. Lack of Government regulations and policies regarding licensing, performance, and accountability
2. Unorganized participants, including small-time trucking companies, have been taking advantage of this situation by cannibalizing business from professional warehousing providers.
3. High turnaround time due to lack of infrastructure, inadequate docking facility etc.
4. Poor service provided by 3PL providers leads the customers to dissatisfaction
5. Lack of cold storage space
6. Inadequate transport facilities like less rail freight, high container costs, less number of reefer vans
7. Low penetration of IT practices in the warehousing industries
8. Lack of training to build skilled manpower

For the better development and growth of warehousing companies in India,  the services provides has to look in the three key essentials for warehouses: 1) the warehouse should be logistical, i.e. right location of the warehouse.  2) well defined norms is needed for the growth of warehousing industries and to enhance the supply chain, in the form of Warehousing Regulation & Development Act (WRDA) 2001 and Goods and Services Tax (GST) [Frost & Sullivan Research Service, 2009]. These regulations will eliminate the non-registered and warehousing companies and standardize the warehousing rates across the country and finally all the operations data should be to synchronize with the IT systems.  Moreover these three key essentials would enhance the efficient distribution and supply chain in logistics sector which would create a demand for the more storage and warehousing services in India.
 

 Reference:

1.      Dr. D.P. Patra, Jt. General Manager (Mktg) IFFCO, Logistics Planning For The Fertiliser Sector

2.      http://planningcommission.nic.in/aboutus/committee/wrkgrp12/pp/wg_ware.pdf

3.      Strategic Analysis of Growth Opportunities in Indian Warehousing Market, Frost & Sullivan Research Service, 14 Dec 2009. Retrieved from http://www.frost.com/prod/servlet/report-brochure.pag?id=P354-01-00-00-00

4.      Sanjay Khanna, (September, 2011), CARGOTALK. Retrieved from http://www.cargotalk.in/pdfs/sept11.pdf 

5.  Building Warehousing Competitiveness, “Adopt the Best”, conference proceedings, 29-30 July 2009, New Delhi. Retrieved from http://www.ciilogistics.com/building_warehousing_adopt_the_best.pdf