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Draft Policy Document

Development of Multimodal Logistics

Parks

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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

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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

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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.

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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

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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. Attractiveness of value proposition of the logistics park for each commodity

group and hence propensity of using the services offered by logistics parks

iii. Average inventory days and seasonality factor of each commodity

iv. 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. Intermodal zone – rail siding area for intermodal freight transfer; terminals for

inland waterways, wherever applicable.

iii. Value added services zone- Package, Re-packaging, Processing, Re-

processing.

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)

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- 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. Recycling of water for landscaping and horticulture

iii. 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

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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.

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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.

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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. Detailed design and engineering responsibilities

iii. 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.

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ANNEXURE I

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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