India to witness warehousing boom

It is in the warehousing sector that India is witnessing another boom these days.

Warehouse companies in India are increasing capacity thanks to huge demand for various agricultural products because of the increasing delivery system in futures market and the retail boom that is taking place across the country.

But warehousing experts said delays in land acquisition and high costs are hindering the establishment of modern warehouses.

"The Indian farmer will get a much better price for his produce, is he is able to store them well," says Managing Director Anil Choudhary of National Bulk Handling Corp Ltd.

He said over 40 commodities being traded and more additions likely, greater investment in warehousing facilities is needed from the farm gate to the delivery point.

At present, bulk warehousing in India is provided by the government-run Food Corp of India, Central Warehousing Corp. and 17 state warehousing corporations and single-space owners.

Food Corp.'s managed storage capacity is 25.2 million tonnes while CWC's is 10.3 million tonnes. CWC also has 50 percent stake in state warehousing corporations that manage 25

million tonnes.

Choudhary said NBHC, a subsidiary of the leading commodity bourse -- the Multi Commodity Exchange of India -- will add 5 million tonnes of warehousing capacity in 3-5 years.

Experts said land acquisition is the biggest problem that the warehousing industry faces these days.

According to Ajay Khera, executive director (commercial) of Central Warehousing Corp, land acquisition is a very major issue and given the fact that a warehouse does not give immediate returns, it is a serious issue.

He says the procedure for land acquisition takes at least two years to complete. "So, if you have land that belongs to your forefathers, construct a warehouse. That is the best thing," he added.

A recent report by brokerage Macquarie Research said the Indian government plans to spend $24 billion over eight years on cold or supply chain infrastructure.

The government is also planning to appoint a warehousing regulator and create tradeable instruments in national warehousing receipts through the Warehouse (Development and Regulation) Bill, 2005. The new law is expected to be passed later this year.