An overhaul entrenched deep beneath the usual look and feel of imagination is taking shape in India’s warehousing sector.While cramped, ill-equipped storage units will make way for sprawling, high-tech and air conditioned facilities, the metamorphosis driven by the much-awaited roll out of the Goods and Services Tax (GST) Act is set to augur a new order in the industry dynamics.For starters, the country for the first time is available as one seamless market. Until now it existed like 36 mini markets. The tax norms for every truckload of goods shuttling across the diverse landscape changed at State boundaries. But the convoluted culture ends with the introduction of GST, touted as India’s biggest tax reform since independence. The sin gle-tax regime comes with the freedom to pick any part of the country for your storage needs.
Halving of stockpile cost will be one of the immediate upshots of the move. Instead of having two warehouses in Mumbai and Ahmedabad, you could have one high-tech facility in between, say in Vapi, which could service both the markets.
The capacity of 25-odd warehouses commercial space for rent in Bangalore across the national network could be efficiently managed by 5-8 hitech facilities at strategic locations Warehouse in Bangalore . The gears are changing across the supply value chain. Better stock management, cutting-edge automation and improved manpower management are simultaneously taking shape. While cheap labour continues to compete with automation some logistics majors have begun talks with robotics firms. The rub-off effect subsequently reflecting in delivery timelines would complete the service cycle.
India’s warehousing landscape is set to double over the next three years. Currently, India has approximately 100-110 mn sqft of leasable space in the organised warehousing sector in the top eight cities. Now, large tracts of unrecognized storage units scattered across the country would gradually become part of this changing topography. Commonly referred as godowns, the fringe players mushroomed in the shadow of the erstwhile tax regime.
But such facilities are threatened to lose relevance with GST coming into effect from July 1, 2017. The tax reform has already drummed up sentiments indicating massive investments for new-age warehouses. Stiff competition from organised players is likely to elbow them out of the race. And, the overall churning and the ease of doing business would bring consolidation in the sector.
A wave of private equity investments is waiting to flood the warehousing sector. The revamped image in the single-tax regime coupled with the massive potential for new-age facilities would attract an array of private equity funds.
Recently, the Indian supply chain arm of a global logistic giant committed an investment of more than 160 million USD to double its warehousing capacity. Many such million dollar deals on drawing boards are set to introduce large-format modern warehousing in India.These high-tech units are likely to come up at strategically placed locations closer to consumption centres.
The reform-driven eco-system would lay the genesis of a level playing field in the warehousing sector. Until now tax evasions were rampant, particularly in the unorganised sector which gave a competitive edge to fringe players. With one nationwide tax coming into effect this skewed ratio would even out. The scope of healthy competition would see the foray of genuine performers in the business. From a holis tic point of view blue ticks appear on most items against checklists of investors looking at the warehousing sector.
But every perfect narra tive demands a stunning climax. The success of the warehousing sector pins on the seamless implementation of the GST. Some teething problems are ex pected but this strategic shift in policy is the beginning of a new dawn.
Courtesy by TIMES PROPERTY