Draft Policy Document Development of Multimodal Logistics Parks 1
1. Introduction Freight movement in India has doubled to ~2,300 Bn Ton Km in FY15, from ~ 1,200 Bn from FY 08. Freight movement in the country is expected to continue its growth trajectory, with an expected annual growth rate of 8-10% over the next ten years. With this expected growth in freight movement in the country, there is a need to focus on improving the logistics efficiency to reduce the overall cost and time of the freight movement in India. Freight Logistics, comprising transportation, warehousing and value added services (VAS) spanning road, rail, sea and air, acts as an enabler and as a catalyst, spurring economic growth. India s rankings on global indices related to logistics performance, like the World Bank driven Logistics Performance Index (LPI) where India has moved up in ranking from 54 to 35 and Ease of Doing Business (EoDB), reflect that the country is heading in the right direction. However, there still is need for focused action the marginal improvement in key sub-metrics, like Freight movement time and Freight cost parameters of LPI, point towards the same. India s freight modal mix is heavily skewed towards roadways with roadways constituting 60% of total freight carried in the country, as against railways which constitutes ~32% of freight movement. Further, more than 50% of the long haul freight movement happens by road. Freight movement by road is typically 25 30% more expensive than railways for long haul routes, thereby increasing the overall freight transportation cost in India. Infrastructure to enable seamless multimodal freight transfer is critical to ensure efficient freight movement in the country, with first and last mile through road and line haul movement through more efficient modes such as railways, waterways, etc. In addition, the warehousing market in India is highly fragmented with a majority of warehouses less than 10,000 sq.ft.. ~90% of the warehousing space in the country is controlled by unorganized players with smaller sized warehouses with limited mechanization. Fragmented warehousing footprint results in higher average inventory holding, in addition to resulting in higher storage and handling losses, driven by lower level of mechanization. The aforementioned issues have resulted in higher logistics cost in India compared to other developed countries. For instance, the logistics cost in India is ~13% of its GDP as against ~8% in the USA. It has thus become essential to create not just the highest quality of road 2
infrastructure but also adequate infrastructure for enabling seamless multimodal freight transfer and world class storage and handling. Acknowledging the importance for inter-modality in transportation, the Hon ble Finance Minister made the following remarks in his Budget 2017-18 speech: An effective multi-modal logistics and transport sector will make our economy more competitive. A specific program for development of multi-modal logistics parks, together with multi modal transport facilities, will be drawn up and implemented The Ministry of Road Transport & Highways (MoRTH) has decided to develop multimodal logistics parks (MMLPs) to address the aforementioned issues and to improve the logistics efficiency in the country. 1.1 Introduction to Multimodal Logistics Parks A Multi-Modal Logistics Park (MLP) is basically as a multi-modal freight-handling facility with a minimum area of 100 acres comprising mechanized warehouses, specialized storage solutions such as cold storage, facilities for mechanized material handling and inter-modal transfers container terminals, bulk / break-bulk cargo terminals. In addition, a Multi Modal Logistics Park is expected to provide value added services such as customs clearance, provisions for late stage processing activities such as sorting / grading and cold chain, aggregation / disaggregation, etc. to handle freight. Multimodal logistics parks are expected to provide four key services as explained below: a. Freight aggregation and distribution: Logistics parks acting as freight aggregation and distribution hubs will enable line haul freight movement (between hubs) on efficient modes such as larger sized trucks, rail, waterways, thereby aiding in reduction of overall freight transportation costs. b. Multimodal freight transportation: Road, rail, air and waterway connectivity of the Logistic parks would enable efficient multimodal freight transportation. This shall aid freight transportation on line haul (between hubs) to shift from road to rail and waterways (wherever possible), thereby reducing the freight cost. In addition, completion of the proposed rail dedicated freight corridors (Delhi to Mumbai, Ludhiana 3
to Kolkata) and focus on developing Coastal and Inland Waterways shall accelerate adoption of rail and waterways for freight movement respectively. c. Storage and Warehousing: Modern mechanized warehousing space, catering to the needs of different commodity groups would be another outcome. d. Value added services: Logistics parks will provide value added services such as customs clearance with bonded storage yards, quarantine zones, testing facilities, warehousing management services, etc. In addition, provisions will be made for late stage manufacturing activities such as kitting and final assembly, grading, sorting, labelling and packaging activities, re-working, return management, etc. as needed. e. Reduction in inventory holding costs: With higher proportion of mechanized material handling, warehousing in logistics parks will enable reduction in storage and handling losses. In addition, availability of a consolidated warehousing zone will enable organizations to reduce their average inventory holding and the associated costs. f. Reduction in freight transportation lead times: Customs clearance at logistics parks is expected to enable reduction in waiting time at the ports and thereby reduce the freight transportation cost and time for export cargo. In addition, provisions for packaging/ repacking and return management at the Logistics Parks will enable a reduction in overall supply chain lead times. 2. Multimodal Logistics Parks- Location Norms and Design Principles There is a need to develop Multimodal Logistics Parks in all the major production and consumption centres in the country. Locations for development of Logistics Parks shall be prioritized based on the amount of freight flow, need for trunk infrastructure connectivity and the extent of competing facilities available. With a view to the economic viability of the Logistics Parks, Logistics as a sector will be considered for grant of Infrastructure status. Since customs bonding facilities for export/import of cargo, and quarantine facilities for clearance of food items would be mandatory, the requisite provisions will be made by involving the concerned Ministries/ central agencies. 4
2.1 Norms for Location Identification 35 locations which account for ~50% of the road freight movement have been identified for developing multimodal logistics parks in phase 1. An indicative list of some locations and their economic potential is at Annexure I. The prioritized list of 35 locations is provided in Annexure 2. The land parcel for development of Logistics Parks shall be finalized based on an assessment of freight flows and the connectivity requirement, within each node. a. Freight flow assessment: A detailed assessment of the freight flow patterns shall be conducted for each node to understand the direction of the freight movement. Land parcels along the Highway with maximum freight flows from and to the node shall be prioritized for development of Logistics Parks. A network of Logistics Parks shall be developed along the Highways carrying large freight flows to cater to the needs of the node. b. Proximity to production and consumption zones: While Logistics parks shall be developed outside the limits of the city to enable congestion reduction in the city, land parcels that are closer to the periphery of the city, preferably along the ring roads/ city bypasses shall be prioritized. c. Connectivity requirement: Land parcels near National Highways and Railway network with good access to other modes such port and inland waterway terminals shall be prioritized for development of Logistics Parks. 2.2 Design Principles The size and facilities needed at Logistics Parks Facilities needed at each Logistics Park depend on the key commodities produced and consumed by the individual location. In addition, the extent of competing facilities catering to the needs of the city shall be assessed to evaluate the size of the facility needed. a. Area required for building a logistics park at any particular location will be determined based on the projected commodity wise freight generating and terminating at that 5
node. The following factors would be considered in estimating the area required: i. Type of storage needed by commodity covered, open or special storage ii. iii. iv. Attractiveness of value proposition of the logistics park for each commodity group and hence propensity of using the services offered by logistics parks Average inventory days and seasonality factor of each commodity Material bulk density and storage norms for each commodity v. Competing infrastructure catering to the requirements of the city b. There will be five broad zones: i. Commodity storage zone dedicated zones for different types of commodity and bonded storage yard along with vehicle loading ramps, cross docking facilities. ii. iii. Intermodal zone rail siding area for intermodal freight transfer; terminals for inland waterways, wherever applicable. Value added services zone- Package, Re-packaging, Processing, Reprocessing. iv. Ancillary services zone dedicated area for other value added services such as customs clearance, vehicle service area, office spaces, restaurant, Retail & wholesale, Hotels and entertainment etc. v. Vehicle parking zone dedicated area for vehicle parking. d. Multimodal Logistics Parks can be developed on the following suggested lines: 50-55% of the area allocated for Core Logistics Activities, which includes- - Warehousing Zone: Open Storage, Covered Storage, Regulated Storage, Cross Docking Facilities - Intermodal Areas: Rail Siding, Loading/ Unloading facilities, Inland Waterway terminal (where applicable) and Air Cargo Terminal (where applicable) 6
- Value Added Services: Labelling, Packaging, Re-packaging, Processing/ Re- Processing, Kitting, Assembly, Return Management, etc. - EXIM Clearance: Custom clearance services, bonded storage, testing facilities, quarantine zones 10 12% of the area allocated for Ancillary Logistics Activities, which includes - - Vehicle sales and service: Vehicle maintenance, fuel stations (along with air filling station, puncture repair & pollution check), consumer vehicle sales - People Service: Lodging, sanitation, dhabas, dormitories for truckers, loaders, unloaders, etc. - Office spaces: Office space for Logistics Service Providers, Transporters, etc. 15 17% of the area allocated for truck parking and internal roads for trucks 10 12% of the area allocated for administrative facilities and commercial zone such as Banks, ATMs, Medical facilities, Retail and wholesale area, Entertainment, convention centres, etc. 10 12% of the area allocated for landscaping and development of open green zones Prevailing standards and norms for safety, operation and maintenance will be applicable e. Adherence to Green Principles will be encouraged. These would include: i. Extensive horticulture and plantation along with adequate sewage treatment ii. iii. Recycling of water for landscaping and horticulture Use of natural materials like dry stone cladding for exteriors iv. Use of bio-methanation for treatment of bio waste and for generation of cooking gas v. Rainwater harvesting vi. Provision of single/ double glazed windows with matched U-Factor for increased 7
energy efficiency vii. Provision of adequate ventilation and natural day light 3. Management Model Private investment in development of Logistics parks has been muted primarily due to restricted land availability, lack of dedicated trunk infrastructure connectivity to enable efficient freight evacuation. In addition, the potential returns for private players from their investments in end to end development of Logistics Parks including land ownership is limited. Hence, the role of the Government through a Public Private Partnership (PPP) model is essential in enabling private investments in development of Logistics Parks. Participation from private players with prior experience in developing and operating such facilities will ensure that the learning from global best practices in design and operations are leveraged. Participation from the Government will ensure land availability as per land use norms, and trunk infrastructure development, together with fulfilment of regulatory requirements, all of which are critical for the success of Logistics Parks. The Project Proponents Central/State Government/private developer-- can drive the development of Logistics parks by setting up SPVs with the NHAI and/or other related agencies such as Port Trusts, IWAI, CONCOR, AAICLAS, Port-Rail Corporation etc. The proponent can assemble the land required for development of Logistics Parks and the requisite trunk infrastructure would be provided by NHAI. Wherever relevant, the concerned central agency would be a part of the SPV; Railways for providing rail connectivity, Port Trust/IWAI for Port/ Waterways connectivity and AAI for Air Cargo Hubs. The equity participation would be decided by the SPV members, who would also finalise the appropriate PPP model, Concession terms, period etc. 4. Implementation Guidelines This section highlights key elements of the execution model, as well as roles and responsibilities of the concessionaire and the government entities viz., NHAI/central agencies and State Industrial Development Corporations. a. Private developers shall be invited for bidding based on approved RFP and contract document. 8
b. Bidding for each logistics parks may be done separately. c. Development, operation and maintenance of Logistics Parks shall preferably be done on a Build Operate Transfer (BOT) model. The Model concession agreement for development of Logistic Parks may be finalised by the stakeholders/state Government and specify the following: i. Bidding parameters ii. Concession fee iii. Service parameters. iv. Concession period v. Specification and standards vi. Monitoring mechanism vii. Incentives and penalties viii. Facilities ix. Blue print 4.2 State Government as the key stakeholder State Government can provide the land required for the Logistics Park or it can be assembled/mobilised from private developers, with the said land parcel necessarily conforming to all prevailing state legislations. State Government shall also facilitate all the regulatory approvals needed for land use conversion, before an encumbrance free land parcel is provided to the Concessionaire for development of Logistics Parks. State Government Authorities shall facilitate utility connections (Power, Water, Sewerage, etc.) for the Logistics Parks in a time bound manner and also ensure seamless movement of trucks into the Logistics Parks with enabling traffic regulations. In addition, the State Government shall make appropriate arrangement to maintain Law and Order within and around the Logistics Parks. State Governments should plan and facilitate development of Industrial and Manufacturing Parks adjacent to Multimodal Logistics Parks through appropriate zoning and master planning norms to ensure that network benefits of co-located Industrial and Logistics Parks are realized. 9
4.2 Role of Concessionaire The role of the concessionaire is to be defined in the MCA. Broadly, it may include the following: i. Funding for the project ii. iii. Detailed design and engineering responsibilities Operation and Maintenance of the multimodal Logistics Parks in line with the service level agreements mentioned in the concession agreement finalized with the Authority b) While the overall responsibility of development, operation and maintenance of Logistics Parks shall rest with the concessionaire, the concessionaire shall be permitted to engage with third party contractors to outsource certain elements of the Logistics Parks, as needed. The concessionaire shall be responsible for obtaining all requisite permission(s) from the concerned authorities for design, construction, operation and maintenance of the site. 10
ANNEXURE I 11
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Annexure 2 Locations prioritized for development of Multimodal Logistics Parks in Phase 1 S.No. Logistics park location 1 Delhi NCR (Delhi, Gurgaon, Ghaziabad, Faridabad, Noida) 2 Mumbai (Mumbai, Mumbai Suburbs, JNPT, Mumbai Port, Raigad District) 3 North Gujarat (Ahmedabad and Vadodara) 4 Hyderabad 5 South Gujarat (Surat and Bharuch) 6 South Punjab (Ludhiana, Sangrur, Patiala) 7 North Punjab (Amritsar, Jalandhar, Gurdaspur) 8 Jaipur 9 Kandla 10 Bangalore 11 Pune 12 Vijayawada 13 Cochin 14 Chennai 15 Nagpur 16 Indore 17 Patna 18 Kolkata 19 Ambala 20 Valsad 21 Coimbatore 22 Jagatsinghpur 23 Nasik 24 Guwahati 25 Kota 26 Panaji 27 Hisar 28 Visakhapatnam 29 Bhopal 30 Sundargarh 31 Bhatinda 32 Solan 33 Rajkot 34 Raipur 35 Jammu 14