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Construction World Magazine India | Haryana, Assam to be new warehousing hubs
Haryana, Assam to be new warehousing hubs
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For FMCG and consumer durables because of consolidation and tax benefits.
Warehousing cost to fall 25-50 per cent after GST.
Nagpur not in the reckoning for now.
Warehousing cost for consumer durables is set to halve, and would fall by 25-30 per cent for fast-moving consumer goods (FMCG) after the implementation of the Goods and Services Tax (GST) regime.
Consequently, the number of warehouses that a consumer durables company has could reduce to 10-12 from a typical 25-30, and to 30-35 from 45-50 for FMCG companies. And the size of warehouses will become bigger, and turn into the so-called big boxes.
As for warehousing hubs, the five major ones today – Mumbai, National Capital Region (NCR), Bengaluru, Hyderabad and Kolkata – will retain their importance because of being major consumption centres for both consumer durables and FMCG. And new hubs would emerge in Assam and Haryana.
Prasad Koparkar, Senior Director, CRISIL Research,
“NCR is expected to see maximum warehousing consolidation as the distance between states is only 250-300 km, which can be catered to from a consolidated hub. Earlier, warehouses were there in almost every state within NCR to save on tax. Now, Haryana is likely to emerge as a consolidated hub, rather than New Delhi or Ghaziabad in that region.”
Haryana would be preferred as a consolidated hub for consumer durables and FMCG rather than New Delhi or Ghaziabad as the former is one of the highest consumption markets within NCR and is less than 300 km away from other major markets such as Punjab and Delhi, and 350-450 km from Rajasthan, Himachal Pradesh and Uttarakhand.
Besides, Haryana’s central location in NCR, land availability, cheaper land costs, key consumption market and connectivity with the Golden Quadrilateral make it the preferred location. Moreover, the interior regions of Haryana such as Faridabad, Manesar and Kundli also have good road connectivity.
New Delhi is one of the biggest consumption markets in India but as per the NCR Master Plan 2031, it cannot have warehousing in a commercial zone. Besides, urbanisation has pushed up land prices.
On the other hand, Ghaziabad lacks land, and the NH-71, which courses through it is congested due to city traffic and residential areas. Connectivity in the interiors of Ghaziabad is also poor. Besides, it has low per capita consumption compared with other NCR locations and it takes significant time (six to nine months) for land conversion for warehousing. However, Ghaziabad can continue as a warehouse hub for FMCG as Uttar Pradesh is densely populated.
Binaifer Jehani, Director, CRISIL Research
, “Guwahati will emerge as a hub for FMCG following extension of excise duty benefits in the north-east. Many FMCG companies have expanded their manufacturing facilities in the region because it is centrally located and equidistant to key consumption markets. But high land costs and narrow roads in Guwahati, which often causes traffic congestion, could be an inhibiting factor.”
However, and contrary to expectations, Nagpur is unlikely to emerge as major warehouse hub in the near term for consumer durables and FMCG due to GST, because currently it is neither a major consumption market nor a major manufacturing hub.
Despite being in central India, it is more than 800 km from major consumption markets such as Mumbai, Delhi (NCR), Bengaluru, Chennai and Kolkata. Most of the warehousing demand for consumer durables emanates from the north, which is the largest consumption market in the country. On the other hand, because consumer durables components are mostly imported, warehousing demand is in the west and south.
But Nagpur may be preferred by some FMCG companies to serve parts of Madhya Pradesh (such as Jabalpur) and Telangana, given the low turnaround time (TAT) of 24 hours. Going forward, if Nagpur attracts manufacturing sector investments due to the government’s move to make it a National Investment Manufacturing Zone, it may become a warehousing hub in due course.
National Capital Region
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