To meet the growing trend in the logistics sector, India needs more logistics professionals with analytical and technology skills, supply chain knowledge and line management leadership.

The logistics sector is valued at $110 billion and expected to touch $200 billion by 2020. The sector is will double its growth in seven years from the present growth rate of 15 per cent, K.V. Mahidhar, Head, CII Institute of Logistics, said.

He was speaking to reporters at Vidyabharathi Group of Institutions, Kochi in connection with the orientation of June 2013 batch of logistics courses. He said India is emerging as one of the world’s leading consumer market and the FMCG sector alone is expected to grow at a base rate of 12 per cent annually by 2020.

To service such a large market at shortest possible time with least cost, he said the logistics sector is expected to play an important role in accessing this emerging market and enabling growth.

Job Opportunities

Quoting FICCI survey, he said a huge demand of supply chain and logistics professionals is expected in the sector which would touch over 9 lakh by 2015. The emergence of infrastructure facilities such as container transhipment terminals, port-based economic zones, entry of multinationals and innovations in the logistic industry would lead the growth of logistics industries, he added.

CII Institute of Logistics and Vidyabharathi joined hands to offer various courses in logistics since 2011. Vidyabharathi Institutions are under the corporate umbrella of Falcon Infrastructures Ltd, the first integrated logistic hub in Kerala.

The institution has been offering logistic courses to create a pool of job ready and industry ready logistics professionals.

With 13 major ports, around 200 non-major ports and a coastline of 7,500 km, India offers a huge opportunity for the maritime industry in India, an Ernst & Young-Ficci report 'The Indian ports and shipping sector: breaking boundaries, tapping potential', points out.

To leverage this opportunity and to ensure optimum utilisation of the coastline, the government is encouraging private-sector participation in port development. Indian ports are now witnessing unprecedented interest both from strategic buyers including international liners, terminal operators and captive players, as well as financial suitors including banks, and infrastructure funds.

"By establishing a direct link between performance and profitability, privatisation motivates private entrepreneurs to improve their return on investment and provides them with an incentive to continuously improve their efficiency," said Sushi Shyamal, partner-infrastructure practice, Ernst & Young.

"The increasing trend of western countries moving their manufacturing functions to low-cost countries, and the likely prospect of India emerging as a manufacturing outsourcing hub, is expected to contribute to the growth of the country's marine industry," said the report.

Challenges faced by the shipping sector like port congestion, limited presence in India's overseas trade, underdeveloped coastal shipping and unfavorable indirect tax regime are a few reasons for leading to corporatisation of minor ports in India.

"Since shipping is an investment which can be easily redeployed to various geographies our focus should be on improving, deployment of capacity to Indian ports and usage of coastal shipping as a logistics option," said Samir Kanabar, partner-infrastructure practice, E&Y.

Shortfall in railway and road infrastructure and shortage of adequate warehousing and coal-chain facilities are creating major roadblocks for the growth of the Indian logistics industry, although it has swelled to an estimated size of $130 billion at present.

With companies across sectors, such as FMCG, retail, pharma and automotive, increasingly outsourcing their logistics requirement to third party and fourth party service-providers, it is vital that the logistics infrastructure is strengthened to support the growth in the industry. This was the dominant view of experts and analysts at a seminar on Logistics Infrastructure organised by the CII's Institute of Logistics in Hyderabad last week.

Freight traffic on the three major arteries of transportation — rail, road and air — is expected to grow significantly in the coming years. The Ministry of Railways has estimated that the rail freight is likely to touch 1,100 million tonnes (mt) by end-2012, while road traffic is expected to increase from 3,000 mt last fiscal to 3,700 mt by 2013.

Analysts feel that warehousing and cold-chain infrastructure require special attention compared to other arms of the industry, as these two key links in the entire logistics chain are comparatively the weakest.

KEY CHALLENGES

“India is estimated to have about 1,800 million sq feet of warehousing space, with eight per cent of this only being owned and operated by organised player. With the growth in the logistics sector, India needs at least 25-30 million sq.ft of additional warehousing space annually. This poses a major challenge,” says Mr Ramesh Nair, Managing Director of real estate professional services company Jones Lang LaSalle Meghraj's Chennai and Hyderabad regions.

While the Indian logistics industry is estimated to have grown to $130 billion, warehousing accounts for about 20 per cent of this market and is expected to grow to about $55 billion by the end of the current fiscal.

“Today, many of the warehouses in India are outdated and serve as mere godowns. About 90 per cent of the warehouses still have asbestos roofing with minimal automated material handling systems. In fact, the role of warehouses has transformed from a conventional storehouse to an inventory management facility with a greater emphasis on value-added services,” says Mr Sanjay Upendram, CEO of Amarthi Consulting.

COLD STORAGE FACILITIES

Similar shortfalls exist in the cold-chain industry in India, which is estimated between Rs 8,000 crore and Rs 10,000 crore. The Government statistics indicate that India has about 5,400 cold storage facilities with a total capacity of about 24 mt. Uttar Pradesh, West Bengal and Maharashtra lead the States in having the biggest numbers of cold-chain facilities.

According to a FICCI study, about 30-35 per cent of the country's 60 mt of fruits and vegetables produced get wasted due to inadequacies in cold storage and other facilities. In value terms, food worth Rs 58,000 crore gets wasted in India, which is more than the total production of fresh fruits and vegetables in the UK.

The CII has estimated that India's cold-chain infrastructure will require at least Rs 18,000-20,000 crore investment over the next five years to meet the growing requirement of this facility, while the industry size, at the current pace, will grow from Rs 8,000-10,000 crore to Rs 40,000 crore by 2015.

NEW MARKETING MODEL

A study by Amarthi Consulting has recommended, among other things, a new marketing model for perishables, in which the farmers can directly sell their produce to the consumers. Also, to back up this model, an integrated cold-chain infrastructure, covering major production areas, processing units and distribution centres in the country should be set up.

Analysts feel that organised private players, both domestic and foreign, should be encouraged to step up investments in these two sectors so that the entire logistics industry can trace a sustainable growth chart. One positive aspect is that with a policy of 100 per cent FDI in cold-chain facilities and 16 per cent excise duty concessions for cold storage refrigeration equipment, many global cold-chain players and equipment suppliers are expected to enter the Indian market.