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The GST
will standardize tax rates throughout the country,
allowing many corporations to move away from having
warehouses in different states to adhere to each state’s
tax code, and employ logistics companies to manage
distribution and supply chains.
“With GST coming in place, a lot of consolidation is
expected in this space. The case for having a warehouse
in each state will disappear,” said Aswatha Nagendra,
country manager with supply chain consultancy firm
Logistics Consulting Asia, and a 26-year veteran in the
industry.
“Big corporations such as Larsen and Toubro, ITC and
Philips are planning to close down their regional
warehouses in the wake of GST coming in,” said an
executive with a logistics company. “Many corporations
have approached us to handles their distribution and
logistics part to cut down the cost.” He declined to be
identified as a number of domestic and international
companies that are shuttering warehouses are his
clients.
Logistics firms such as Safeexpress Pvt. Ltd , Transport
Corp. of India Ltd, Gati Ltd, Casby Global Air Pvt. Ltd,
VRL Logistics Ltd, NDR Warehousing Pvt. Ltd, Shree
Shubham Logistics Ltd, AFL Pvt. Ltd and Arshiya
International Ltd are now building warehouses or
logistics parks.
Manoj Mohta, head of Crisil Ltd’s research wing, said
the introduction of GST will result in greater adoption
of a hub-and-spoke model in infrastructure segments such
as warehousing, cold chain, container freight stations
and inalnd container depots.
“The realignment of the infrastructure needs would aid
in the reduction of the number of intermediaries and
also help streamline supply chain operations,” Mohta
wrote, adding that this would reduce infrastructure
spending on logistics and supply chain and cut inventory
costs for companies.
Yogesh Dhingra, chief operating officer at Blue Dart
Express Ltd, said bigger firms are open to outsourcing
transportation to experts in the industry while his
company’s warehousing requirements are met through
parent company DHL Group.
Pawan Jain, chairman and managing director of Safexpress,
which operates 3,500 trucks, and counts Raymond Ltd and
Ranbaxy Laboratories Ltd among clients, said most of the
leading manufacturers currently have 20-25 warehouses
across the country. “With GST, this will change and
companies like us will take charge,” he said. “We are
building 32 logistics parks with an investment of Rs650
crore by 2011. By then, we will have 10 million sq. ft
of warehousing space.”
Arshiya International is building India’s first free
trade warehousing zone, which will have integrated
transport infrastructure. Kapil Anand, chief executive,
free trade warehousing zone, operations, said the
company would have five such zones with 10 million sq.
ft and that all facilities would be rail linked
Vineet Agarwal, executive director of Transport Corp.,
said his firm builds a million sq. ft of warehousing a
year as companies demand more organised and
well-designed warehouses. Transport Corp., which owns
about 1,200 trucks, manages 7.8 million sq. ft of
warehousing space.
AFL is also expanding operations. “We intend to
purchase, design, build and operate warehouses. We are
planning to have one to two million sq. ft of
warehouses,” said Juzar Mustan, chief executive officer,
logistics, AFL, which has a fleet of 1,000 trucks.
Shree Shubham, a subsidiary of Kalpataru Power
Transmission Ltd, plans to set up 41 warehousing and
agri-logistics parks in nine Indian cities with an
investment of over Rs600 crore.
Source
:
Institute of International Trade, India, dated 29/09/2009
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