Post ‘infrastructure’ tag, logistics firmsset store by warehouses, container depots

04 December 2017

Container depots with smaller areas can now access low-cost infrastructure funding following the recent notification expanding the list of infrastructure funds and likely availability of such funds, say companies in the logistics sector such as Allcargo Logistics and Embassy Industrial Parks.

“A strong contribution that has also come as part of the inclusion of logistics in infrastructure is the lowering of inland container depots (ICD) area criteria to ten acres from the previous 25-30 acres. I feel it will be a benefit to developers in this segment, creating an ease of flow for storage and flow of container traffic,” said Anshul Singhal, Embassy Industrial Parks, which is a joint venture between Warburg Pincus and Bengaluru-based realty giant Embassy Group.

Lower borrowing cost

Shashi Kiran Shetty, Chairman, Allcargo Logistics, said that he expects the cost of borrowing to be lower by around 100 basis points, apart from stating that that there could be consolidation.

Shetty added that the firm will capitalise on the opportunity through a planned push to the domestic logistic business where “we have a stated interest to develop our next phase of growth”.

He said that their contract logistics business, upcoming logistics parks in Jhajjar outside Delhi, land banks at strategic locations — Nagpur, Hyderabad and Bengaluru — will help the firm further strengthen its pan-India service offerings for clients. “We may also see some consolidation in the industry where large organised players like Allcargo should have some added advantage,” added Shetty.

Shetty felt that “Going forward, the key triggers for the logistics sector would be a combination of pro-market initiatives by the government like Bharatmala, GST, Make in India, dedicated rail freight corridors, massive investment foreseen in the Railways that will ensure seamless connectivity.…This, coupled with easier availability of funds and lower cost of capital through the infra status accorded, will definitely resolve the issue of high costs…..If all major projects are implemented as planned, it is sure to steer economic activity in the nation and reduce the overall logistics cost to around 10–12 per cent, from the current 14 per cent.”

Recently, the Finance Ministry added the logistics infrastructure in sectors that qualify for lower cost funding by including Multi-modal Logistics Park comprising Inland Container Depot (ICD) with minimum investment of ₹50 crore and minimum area of 10 acre, cold chain facility with a minimum investment of ₹15 crore and minimum area of 20,000 square feet, or warehousing facility with investment of minimum ₹25 crore and minimum area of one lakh square feet.

Source: The Hindu