Times of India – Decoding expectations of the Indian warehousing and contract logistics sector from the 2023-24 Union Budget

In the Covid era, the Indian logistics and supply chain sector has emerged as a significant backbone of 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 Logistics 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:

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 increase in procurement. While several factors during the pandemic have been at play, this rise in price has impacted 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 would be a huge accelerator in development of smart and digitally equipped warehouses.

Better road infrastructure: The ambitious Gati Shakti plan aims to create an ecosystem that links roads and railways from the hinterlands to the ports in coastal India, as part of the National Logistics Policy. The plan includes the development of around 2 lakh km of National Highways and nearly 6,000 km of 4-6 lane National Highways in the coastal regions, connecting the Northeast 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 Rs 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.

Capital subsidies and Public-Private Partnerships (PPP) for multi-modal logistic parks: Multi-modal logistic parks have been another key focus of the GoI’s National Logistics 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 (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.

Subsidising green warehousing: The transport and logistics 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, incentivising/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.

Subsidies for tech adoption: While technology adoption has been a buzz word during COVID and the rise of smart warehousing has become the need of the hour, digitisation continues to be a 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 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.

Surface Movement Solutions

At LP Logiscience, our land transport solutions offer a vast network of products and services to help our clients achieve a competitive edge. Our top-notch land shipping solutions ensure that your shipments are delivered reliably and on time, whether it's a single parcel shipment or the management of the entire surface supply chain. Our land transport network is equipped to transport goods of any kind to any location, with a track record of delivering millions of successful ground shipments with quality and timeliness.

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Air Movement Solutions

In the ever-evolving world of logistics, a comprehensive solution that combines speed, agility, and dependability is critical. At LP Logiscience, we offer a range of services to meet complex logistical requirements while maintaining an optimal balance between cost and speed to market. Choose a tailor-made solution that best suits your needs to start improving the efficiency of your supply chain. Our air movement solutions enable you to transport time-sensitive, high-value cargo quickly and efficiently, bypassing any supply chain disruptions caused by congested ports, labor shortages, or limited capacity. Whether used as a standalone service or in combination with inland transport modes, warehousing, and customs services, LP Logiscience is your ideal partner.

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Multimodal Movement Solutions

Our aim is to grow with our customers on their multi-sales channel journeys across various vertical markets such as retail, electronics, and healthcare, among others. We focus on developing capabilities that will lead to more standardized solutions in a dynamic environment. Our innovative pick and pack solutions and automation tools streamline e-commerce supply chains and allow for easier handling of seasonal peaks. Collaborating with a world-class logistics provider like LP Logiscience means getting better solutions. We handle all aspects of returns, from physical returns to quality checks, repairs, and disposals, ensuring that our clients' businesses run smoothly.

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Rail Movement Solutions

Our goal is to support our clients in their e-commerce journey across different vertical markets, such as retail, electronics, and healthcare. We strive to develop standardized solutions that cater to a dynamic environment, using innovative pick and pack solutions and automation tools that streamline supply chains and handle seasonal peaks. Working with a top-tier logistics provider like LP Logiscience guarantees superior solutions. We handle all aspects of returns, including quality checks, repairs, and disposals, ensuring seamless business operations. With our LCL rail freight multimodal service, we offer regular, scheduled departures and capacities across major city centers in India, providing reliability and flexibility for our clients.

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Temperature Controlled Movement Solutions

We understand the unique needs of perishable items and collaborate with cold chain partners to ensure they arrive on time and in perfect condition. Companies that can provide quality products with a long shelf life will have an advantage as demand for fresh products grows. However, this can be a challenging task, as perishable goods are fragile and require quick transportation. Maintaining a strict cold chain throughout the entire journey is essential to preserve freshness and taste. We adhere to all regulations when shipments cross borders to ensure that the process is as seamless and quick as possible. Our perishables teams at LP Logiscience provide safe and efficient transportation for temperature-sensitive cargo to exact specifications. Whether shipping fresh fruits and vegetables by land or air, our solutions ensure that temperature-sensitive products arrive on time and in perfect condition, with optimal transit times and modes of transportation. Our deep knowledge of various perishable commodities, including local legislation, allows us to provide safe and compliant international transportation from source to table. With real-time visibility from door to door, we monitor and steer your supply chain efficiently to ensure that end consumers receive products in the best possible condition.

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Environment

LP Logiscience's triple zero commitment to environmental sustainability encompasses a zero-waste supply chain. At every stage of our procedures, we prioritize adding value for the consumer and strengthening our competitive edge. Through complete waste prevention, we have modified the way materials move through our entire production process. Our zero-waste initiatives ensure that all materials are recycled or reused, eliminating the need to send waste to water sources, landfills, or incinerators. By reducing supply chain waste, we promote making better use of resources and developing goods and services that align with sustainability principles.

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Safety

At LP Logiscience, ensuring workplace safety, protecting our personnel, and promoting their well-being are critical components of our success and future. While technology can improve safety in modern warehousing, relying solely on safety precautions is not a solution. We prioritize ensuring that all our staff adhere to safety rules and procedures, not just for their safety but for the greater good of the brands they represent and our environment.

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CSR

A common goal: to help society progress.

LP Logiscience sees itself as a logistics partner that is part of a larger picture connecting people and communities worldwide. Giving back to the world and being a part of something bigger is central to our values. We work towards sustainable logistics to have a positive impact on the world around us. By transitioning to a zero-carbon business model and guiding our customers towards a zero-carbon future, we hope to make a difference for people living tomorrow. Our commitment to bringing about social progress has been constant since 1919, and we remain dedicated to this goal as the world around us evolves.

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