Kolkata suburbs find new life as a logistics hub

April 01 , 2022

Source: Live Mint:

The site manager at the Amta Industrial and Logistics Park, 45 kms from Kolkata, stands on a heap of debris as he oversees construction work on a new warehouse on the premises. Till February-end, no buyer had been finalized for the warehouse but, apparently, that is a minor issue. “We will find someone," says Mukul Goel, the manager, exuding confidence.

About half a kilometre away at a tea stall within the complex, four men in fluorescent jackets take some time off from packaging and labelling washing machines at one of Amazon’s two warehouses, one of a clutch of units that are up and operational at the park. “It is our lunch break," one of them explains.

A little further away is the park’s main gate that opens onto a public road, across which begins the second phase of the warehousing complex. Here, a solitary tractor works on a plot of land earmarked for a warehouse planned over three lakh sq ft. “This will also be the largest warehouse in the complex," says supervisor Tapas Roy.

Apart from this warehouse, the others range from 25,000 sq ft (there are two of them), to one lakh sq feet (Amazon’s two facilities are of this size). There are a few empty warehouses, awaiting occupiers, one where an Ahmedabad-based printing and packaging firm is in the process of moving in, and others under construction or on the drawing board. The warehouses are usually about 13.5 meters high.

In a way, the Amta Industrial and Logistics Park, sprawled over four million sq ft, is a microcosm of a silent revolution playing out in the Bengal landscape. A steady stream of e-commerce firms, 3PL (third-party logistics) players and developers are rushing to the state to build and/or run ‘grade-A’ warehousing space in and around Kolkata, and the Amta complex typifies the buzz.

Historically, Indian warehousing has all been about low-grade concrete godowns that dotted the highways around many transit hubs. The goods and services tax (GST), which came into force in 2017, was the first big bang moment for the sector. From a network of smaller warehouses across multiple states, set up to be tax-efficient, companies now picked fewer but larger warehouses in more strategic locations since India became a single tax country. The larger warehouses are made of steel, are often pre-fabricated and more automated. In industry parlance, these are the grade-A spaces.

Bengal has traditionally been eastern India’s principal trading hub, with Hiranandani group’s chief executive Darshan Hiranandani calling it the “gateway to the east… with excellent road, rail and riverine connectivity". As he points out, it is this factor that makes the state “an ideal hub for logistics and industrial development".

Destination Bengal

 Goel and Roy’s boss Pratik Jalan, managing director of Jalan Builders, the Kolkata-based developers behind the complex, has no intention of missing the gravy train. His target: complete the Amta project by the year-end.

In his view, “Bengal is happening."

What has provided the state’s logistics sector the booster shot over the past two to three years is the rise of e-commerce and the evolving buying habits of the Indian consumer.

Says Anoop Chauhan, chief operating officer at Avvashya CCI, a joint venture from logistics firm Allcargo: “Kolkata will witness a phenomenal rise in demand for large format warehouses, mainly due to the rising demand from e-commerce players."

Among those to have shown interest are developers such as real estate major Hiranandani group and Warburg Pincus-backed ESR, e-platforms such as Flipkart and Amazon, and 3PL companies such as Allcargo Logistics, Quickshift and Stellar Value Chain Solutions.

Real estate analyst Chandranath Dey, who is the head of operations and business development at real estate service provider JLL, pegs Kolkata’s total warehousing stock, which includes grade-A and grade-B warehouses, at 29 million sq ft. About 3.8 million sq ft were absorbed in 2021. Another 4-4.5 million sq ft is likely to be absorbed in 2022. By the year-end, the value of warehousing transactions in the city and its suburbs could total ?900 crore- ?1,000 crore, Dey estimates.

Among the top eight tier-1 cities in India, Kolkata, today, has about 10% of the warehousing stock—the national capital region and Mumbai lead the pecking order with 25% and 17% respectively.

Prized Belt

The most exciting warehouse belt in the region is National Highway (NH) 16, which has one end at Dankuni in Bengal’s Howrah district, a warehousing hub in its own right, thanks to its road and rail links.

Piyush Gupta, Colliers India’s capital markets and investment services managing director, describes NH16 —which covers areas off Bombay Road including Sankrail, and Uluberia in Howrah district—as “a sought-after warehousing cluster where smaller units have been consolidated into larger high-quality grade-A facilities". Colliers is a real estate consultancy.

Even Jalan’s company, which has developed two of Asia’s biggest industrial estates—spreading over an area of more than 2,000 acre, including a 1,000-acre industrial park in Sankrail—is now looking for more land to develop in and round the area.

“About 75% of industrial activity in Bengal happens in Howrah district," Jalan says, explaining his interest in this stretch. In fact, his Amta project falls in Howrah.

Other than Jalan Builders, Kolkata-based Prospace is setting up an industrial park in Dankuni, while ESR has acquired 75 acre in Uluberia from the state government to develop warehousing and logistics infrastructure.

A big push is also expected from Stellar Value Chain Solutions, a supply-chain company, which has a 500,000 sq feet logistics park in Dankuni, with two more planned over the next 12 months.

“We will be investing around ?200 crore in the next one-and-a-half years in Kolkata," says Stellar Solution chairman Anshuman Singh. “Every year, we plan to add a million sq feet, so in four years, we would have built four million sq feet in the Kolkata region."

In its India Warehousing Market Report 2021, real estate consultancy Knight Frank underscores another factor that makes this area a sought-after location for 3PL players: connectivity to the Haldia Port. “Many huge vessels carrying freight from other countries dock at Haldia Dock Complex instead of the Kolkata Port Trust, which is a partner to this port," it notes.

But what underlines the growing interest in Kolkata the most, perhaps, is the ?10,000-crore plan unfurled by the diversified Hiranandani group.

In February 2021, the Mumbai-based group announced it was acquiring a 100-acre plot at Hindustan Motors’ erstwhile factory premises at Uttarpara, off Howrah, to set up a logistics and data centre park through two of its subsidiaries.

The industrial and warehousing space, spanning some three million square feet, is to be developed by group subsidiary GreenBase, a joint venture with global private equity firm Blackstone.

Growth Drivers

Three policy decisions–introduction of the GST, infrastructure status for logistics, and 100% FDI in warehousing –encouraged Indian companies to spend on supply chain networks and modern warehouses.

The pandemic also played a part. According to Knight Frank, when e-commerce companies began to flourish during the lockdowns, they turned to 3PL players to revamp their transportation and logistics.

This was reflected in the post-pandemic share of the overall space leased out to different sectors in Kolkata: 3PL companies grabbed a 47% share in 2020-21–as opposed to 26% in 2019-20. In contrast, e-commerce was trailing with 28%. The remaining space was split between FMCD, retail, FMCG and other sectors.

Ravi Jakhar, chief strategy officer at 3PL player Allcargo Logistics, says the demand for his company’s “warehousing services in the east is expected to grow, driven by the e-commerce boom".

“Our CFS operations in Kolkata are also expected to see robust business growth in the coming years," Jakhar adds.

Similarly, Avvashya CCI Logistics plans to add a million sq. feet of warehousing space in the city over the next two to three years.

Land Issues

The state government is doing its bid to help the sector. Recognising that there can be no industrial activity without land, it has begun acquiring it directly from landowners, either to develop the required infrastructure on its own, or for private development.

 Ironically, the government is run by a party that came to power on back of a bitter backlash against Tata Motors overs its Nano small car project at Singur, as the previous Left Front government had acquired agricultural land for it. In fact, current chief minister Mamata Banerjee actively fanned the unrest that ultimately drove out Tata Motors to abandon the site in favour of Gujarat.

But now, having formed the government, the approach of the ruling Trinamool Congress party is more responsive to industry’s needs.

Today, as per a CII estimate, the state offers ready industrial infrastructure with 148 industrial parks, estates, and growth-centres covering around 27,000 acres.

“Land is a sensitive issue anywhere, not only in Bengal," says a senior official of the CII’s logistics and warehousing sub-committee, requesting he not be named because he is not authorized to make a statement to the media. “No government anywhere in India wants land to become a political flashpoint. This is the best possible way forward," he adds.

Plus, says Shyam Arumugam, managing director, industrial & logistics services at Colliers, landowners have become more market savvy over the past two to three years. “Once they saw the demand for warehouses, they themselves are coming forward to sell land."

Confirms local developer Jalan: “We only buy land that is voluntarily sold."

Job Creator

The boom has also opened up the job sector. For instance, CII expects the investments from the Hiranandani group alone to generate over 20,000 direct and indirect jobs in the region.

Similarly, Stellar’s plans for integrated logistics parks with state-of-the-art warehousing, transportation hubs, driver facility and associated infrastructure have “tremendous job potential," says Singh.

E-commerce players Flipkart and Amazon will likely also provide a big boost in this respect. To begin with, Flipkart’s fulfilment centre in Dankuni is expected to generate some 3,500 direct jobs and 50,000 additional jobs across facilities, says a company spokesperson. Flipkart opened the warehouse in 2021.

“Flipkart is also working with over 9,300 kirana delivery partners and 10,000 sellers from the region," he says.

Rival Amazon, similarly, underscores the number of jobs its business model creates. In October 2020, it launched Bengal’s largest fulfilment centre—with a storage capacity of 1.2 million cubic feet—almost doubling its storage capacity in the state, which is expected to support 25,000 local sellers.

Alongside, Amazon has also tripled the storage capacity of its specialized warehouse for large appliances and furniture to over 600,000 cubic feet, taking the company’s storage capacity to over 3.4 million cubic feet across five warehouses in the state.

In addition, the company also has two “sort centres" in Bengal with more than 1.2 lakh square feet of processing area.

 “With this expansion, we will be able to support small and medium businesses while creating hundreds of work opportunities for locals," Akhil Saxena, a vice-president, was quoted in the company’s website as saying.

While there might be temporary ups and downs depending on the trajectory of the pandemic, one thing appears certain: Kolkata’s warehousing sector will continue growing over the next five years. As JLL’s Dey observes, “absorption is not yet 100%".

This is heartening news for small town Bengal, job seekers and the state’s policymakers.

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