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Bengal - The Destination Next for Infrastructure and Logistics 1

Bengal Destination Next for Improved Infrastructure & Efficient Logistics

January, 2018

2 Bengal - The Destination Next for Infrastructure and Logistics

PrefaceIndia is betting big on infrastructure, probably the biggest catalyst for Industrial, Warehousing & Logistics development. In comparison to the BRICs countries (Brazil - 2.5% of GDP, Russia – 4% of GDP, China – 9% of GDP) and even other developed economies (Japan – 4% of GDP & USA - 2.4% of GDP), India invests almost 10% of its GDP in infrastructure. Large scale infrastructure developments like the Dedicated Freight Corridor, Sagarmala Project, Inland waterways and others aim to integrate multiple modes for a seamless distribution in the country.

Some of the key enablers that would have a long term impact on the logistics industry in West Bengal, include:

Higher infrastructure spending: INR 202 billion was allocated in the 2017 state budget for the purpose of infrastructure development.

Cross-country distribution advantage: Bhutan Border Road and Asian Highway II to improve the cross country distribution positioning of Bengal.

Inland Waterway Distribution Advantage: Proposed 1,620 kms long

National Waterway-1 (NW-1) on the Ganga - from Haldia to Allahabad is expected to add an extra logistics distribution model.

Tajpur Port: Tajpur to be developed as a major port by Bhor Sagar Port Ltd, a SPV formed by the Central government-owned Kolkata Port Trust and the State government. It will be developed as a landlord port, in which the basic infrastructure will be funded by the government, while private firms will set up the super-structure to handle cargo.

Kaladan Multi Modal Transit Transport Project: India and Myanmar to create multi-modal modes of transport for cargo shipments from the eastern ports to Myanmar as well as to the North-East through Myanmar. It will connect Sittwe Port in Myanmar to the eastern Indian seaport of Kolkata.

West Bengal is creating waves and is increasingly favoured as a warehousing and logistics destination, due to some of the reasons listed below;

• GST implementation has eradicated state boundaries for distribution purposes and has opened up windows of opportunity to service

Eastern India, as well as the North Eastern states, which is eminent from the growing interest in the region.

• Bengal’s distribution potential stretches beyond the boundary of India, to even neighbouring coun-tries like Bangladesh & Bhutan.

• Lack of Grade A warehousing supply in the region indicates the invest-ment opportunity for organized logistics developers of national and international repute.

West Bengal is certainly at an inflection point in the logistics revolution, with lots of opportunities knocking on its doors. It’s time to view how the state improves its rankings on the ‘Ease of Doing Business’ list, as well as adopts to the changing needs of the sector to embrace growth. Here’s a report that elaborates and discusses the logistics and warehousing scenario, investment opportunities, advantages and potential of the country and West Bengal in particular.

Best regards,

Ramesh Nair CEO & Country Head JLL India


The Indian Logistics Sector has in recent times been in an expansion mode. Against the backdrop of expansion in the economy, the logistics industry has assumed a pivotal role in reducing

costs by improving efficiency and increasing competitiveness. The interplay of infrastructure, technological advancements, change in policies and business environment is likely to define

how it is going to help the customers in reducing costs with the provision of efficient services.

Introduction


The Indian Logistics Sector has in recent times been in an expansion mode. Against the backdrop of expansion in the economy, the logistics industry has assumed a pivotal role in reducing

1 Shipping Industry & Ports in India, IBEF Report 2017; 2 Indian Road Network and Modal Shift, NHAI (http://www.nhai.org/roadnetwork.htm); 3 Indian Railways, Year book 2015-16 (http://www.indianrailways.gov.in/railwayboard/uploads/directorate/stat_econ/2015-2016/Year%20Book%20English%202015-16.pdf)

Shipping12 major and 187 non-major ports handle 95% of countries foreign trade by volume 1

Road3.3 million km long, 2nd largest in the world, carries 65% of the freight traffic 2

Railways4th largest in the world, carries more than 1.1 billion tonnes annually 3

Aviation2% of the country’s logistic movement by volume, 30% by value

Logistics Performance Index (LPI)

In the 2016 report, India has increased its LPI score to 3.42 compared to LPI score of 3.08 in 2014. India has improved its ranking by 19 places among 160 countries

Ease of Doing Business Score

India jumped up 30 notches into the top 100 rankings on the World Bank’s ‘Ease of Doing Business’ index, with major improvements in indicators such as resolving insolvency, paying taxes, protecting minority investors and getting credit

costs by improving efficiency and increasing competitiveness. The interplay of infrastructure, technological advancements, change in policies and business environment is likely to define

how it is going to help the customers in reducing costs with the provision of efficient services.

Indian Logistics at a Glance

35th 100th


Infrastructure Push


Infrastructure Push on Logistics

Sagarmala Project 4

Approved by cabinet on March 2015 to promote port-led development in the country by harnessing India’s 7,500-km long coastline.

• Investment Size: INR 400,000 crore (approx.)• 150+ projects for port modernization and connectivity• 6-8 new ports, 2 international trans-shipment hubs• 14 coastal economic zone to be developed• 400 MTPA capacity to be added within 2020

• It aims to improve road connectivity to coastal/border areas, ports, backward areas, religious and tourist sites.

• The project has identified 44 economic (freight) corridors, inter-corridors and feeder-routes for development. E.g.. Mumbai-Kochi-Kanyakumari, Bengaluru-Mangaluru, Hyderabad-Panaji.

• Western Dedicated Freight Corridor (WDFC- 1,504 Kms) and Eastern Dedicated Freight Corridor (EDFC – 1,856 Kms) to decrease freight transit time substantially5

• Metro Rail / Urban Rapid Transit System: Apart from existing cities, 12 cities might get Metro rail soon

This now enables Logistics sector to get credit on long term basis at competitive rates from financial institutions. This also gives the sector access to funds like External Commercial Borrowings (ECB), long tenure funds from insurance and pension funds as well as borrow from India Infrastructure Financing Company Ltd (IIFCL)

The implementation of GST has made way for cost and operationally efficient ‘Hub & Spoke Model’ of warehousing and is shifting from the inefficient, low quality redundant warehouses to large box and good quality Grade A warehouses

Waterways

BharatmalaRail

Indian logistics sector being granted infrastructure status

GST Implementation

4 SAGARMALA National Perspective Plan, April 165 Dedicated Freight Corridor Corporation of India Ltd.; website - (http://dfccil.gov.in)6 National Civil Aviation Policy, 2016.7 Press clippings, Public Relation department, AAI.

National Civil Aviation Policy 2016 Objectives6

• India to become 3rd largest civil aviation market by 2022 from current 9thposition.

• Airports having scheduled commercial flights to increase from 77 in 2016 to 127 by 2019 Cargo volumes to increase by 4 times to 10 million tonnes by 2027

• Reduction of air cargo dwell time to 24 hrs (import) and 8 hrs

The Airport Authority of India to invest Rs. 12,964 cr for infrastructure projects in 13 regional airports.7

Aviation


Eastern Dedicated Freight Corridor (EDFC)

Inland waterways

8 Dedicated Freight Corridor Corporation of India Ltd.; website - (http://dfccil.gov.in) 9 IWAI website (http://iwai.nic.in/index1.php?lang=1&level=2&sublinkid=145&lid=164)

West Bengal: Infrastructure Status

The EDFC project is part of India’s Dedicated Freight Corridor (DFC) programme, which aims to create one of the world’s biggest cargo operations.

Route length: 1856 km8

Advantage: The proposed development shall be a facilitator for transshipment of cargo from rail to road or road to rail on the dedicated line

Part of the whole route, 1409 km starts from Dankuni in West Bengal

Advantage: Cargo movement through inland waterways could increase in select corridors. NW-1 passes through and serves major cities in industrial hinterlands of West Bengal like Haldia, Howrah, Kolkata

• Inland Waterways Authority of India (IWAI) has begun the preparatory works on converting 106 rivers into National Waterways (NWs) by making them navigable to be used to move freight cargo

• NW-1 - Allahabad-Haldia stretch of the Ganga—Bhagirathi-Hooghly Rivers

Route Length for NW-1: 1620 km9

Map Source: Google

National WaterwaysNE-1 (Ganga) Haldia to Allahabad

EDFC(Ludhiana to Dhankuni)

Ludhiana

Saharanpur

Ambai

MeeutHapur

Pempur

Allahabad

Haldia

Khurja

Kanpur

New GanjkhwajaNew Karwandiya

Dankuni

Dadri


Major Infrastructure Projects

Tajpur Port

Tajpur to be developed as a major port by Bhor Sagar Port Ltd, a SPV formed by the Central government-owned Kolkata Port Trust and the State government. It will be developed as a landlord port, in which the basic infrastructure will be funded by the government while private firms will set up the super-structure to handle cargo.

Alternative supply of LPG to Northeast India

Indian Oil is planning to adopt a new way of supplying LPG to north eastern states by first exporting it to Bangladesh, which is bound to cut the refiner’s freight cost. The LPG might be shipped from Haldia port West Bengal or Paradip port in Odisha to the Chittagong port in Bangladesh from where it could be moved by road.

Kaladan Multi Modal Transit Transport Project

India and Myanmar to create multi-modal mode of transport for shipment of cargo from the eastern ports of India to Myanmar as well as to the North-Eastern part of India through Myanmar. It will connect Sittwe Port in Myanmar to the eastern Indian seaport of Kolkata.

Bhutan border Road

West Bengal government to construct a new 18 km road near the border of Bhutan which will help strengthening the infrastructure in the region.

Asian Highway II

Asian Highway 2 (AH2) is a road in the Asian Highway Network running 13,177 km from Indonesia to Iran. The route enters Bengal through Fulbari from Bangladesh and leaves at Panitanki for Nepal after touching Siliguri.

AH2


West Bengal at a Glance10

91.3 million Population

2 + 1International Airports (Kolkata,

Bagdogra); Domestic (Durgapur)

950 kmof water front, Richly endowed with

natural maritime advantages

USD 140.2 billion Gross State Domestic Product (GSDP) at

Current Prices

2 (1)Existing Ports Kolkata & Haldia

(proposed Tajpur)

4,000 kmof Railway tracks

3rdlargest road network of the country

WaterwaysLeading in the country in terms of

spread, density and reach of National Inland Waterways

12.02%Gross Value Added (GVA) y-o-y

growth rate

Recent Success Stories in Varied Domain

InfosysInfosys to invest INR 1 billion and build a campus on a 50-acre land in Rajarhat- New Town that can employ up to 1,000 people

Tata AIA invests in KolkataTata AIG, an insurance fund has invested in Kolkata INR 1.35 billion in 2017, which shows a renewed interest in capital flow in the city

Haldia PortIn port based success stories, Essar Group has won a bid for setting up 1 million tonne LNG terminal at Haldia port

10 West Bengal, IBEF Report, 2017; website - (https://www.ibef.org/download/West_Bengal-January-2017.pdf), BGBS website


West Bengal: Logistics Nodes

Gateway to North eastern States of India

Indirect connectivity to Myanmar, Thailand (Gateway to South East Asia)

Easy connectivity to neighboring countries of Nepal, Bhutan and Bangladesh

Kolkata14.2 million (Kolkata Metropolitan Area)

Growth Drivers

Connectivity Push: Easy connectivity to Bangladesh

Logistics Push: The second jetty of National Waterways 1 may come at Botanical Garden, opposite to existing Kolkata port

Dankuni is a location under consideration for MMLP under MoRTH

Consumption Base: Large population base considering the vast hinterland of north eastern states of India

Haldia2.75 million (Haldia Planning Area)

Growth Drivers

NW Terminal: Inland Waterway Authority of India (IWAI) awarded the contract of the first multi-modal terminal at Haldia in West Bengal for National Waterways-1

Haldia Port: In FY17, Kolkata Port Trust (KoPT) notched the 6th rank (from 7th) among Major Ports*, with cargo volumes of 50.951 million tonnes including Kolkata and Haldia

Consumption Base: Huge population to be catered for regional distribution

* There are 12 major ports in India as identified by Government of India, ministry of Shipping

Map Source: Google


Asansol- Durgapur1.7 million (Asansol Durgapur Planning Area)

Growth Drivers

Connectivity Push: The twin cities connects Kolkata and Haldia port with the mineral rich western part of Bengal and the state of Jharkhand

Logistics Push: CONCOR may set up a logistics park

Consumption Base- Large population base considering the vast hinterland of Bengal and Jharkhand

Siliguri2 million (Siliguri Jalpaiguri Development Authority)

Growth Drivers

Connectivity Push: Gateway to north eastern states of India and international destinations of Bhutan and Nepal

Logistics Push: A Multi Modal Logistics Park (MMLP) by CONCOR is under construction in Siliguri under PPP mode

Consumption Base: Large population base considering the vast hinterland of north eastern states of India


Kolkata Warehouse Market

Kolkata Logistics Potential

11.6 mn sq ftTotal warehouse stock,

2017*

1.6 mn sq ftAbsorption, 2017

Kolkata’s strategic location as a gateway to North-east India and its proximity to the Kolkata port has made the city a major warehousing location in India.

Port potential

Kolkata and Haldia are together counted as one of the major ports of India and have handled more than 50 MMT of cargo in FY 16-17 (Sixth highest in India)

Kolkata Infrastructure Push towards Logistics

Outer Ring Road: Outer Ring Road of 400 km is to be made operational by constructing 66 km of additional new roadInner Ring Road: The Inner Ring Road is to be completed extending the existing road network in the west and the north

Dankuni (New NH 19)

Delhi and Lucknow connecting corridor

Major cities covered within 12 Hr. travel time: Durgapur, Asansol, Dhanbad, Bokaro, Ranchi, Patna

Dhulagarh to Uluberia

Mumbai and Chennai connecting corridor

Major cities covered within 12 Hr. travel time: Kharagpur, Haldia, Jamshedpur, Ranchi, Bhubaneswar

Sirakol & Kalyani Other warehousing corridors in Kolkata include Kalyani along Belghoria Expressway, Sirakol and upcoming locations in Bantala, which are efficient for in-city distribution

*Note: It does not take into consideration Grade-C, the stock owned by government, ICD, FTWZ and captive warehousing stock by manufacturing companies that are within or beyond their premises. The warehouse stock and absorption data of the year 2017 have been estimated


Warehousing Corridor- Kolkata

Major Locations Monthly Rents (INR / Sq. ft. / month) Market Demand

Grade A B High / Low / Stagnant

Dankuni 20-24 18-22 High

Kalyani NA 9 -12 Stagnant

Sirakol 11 - 14 9 -12 Stagnant

Uluberia 12 -15 10 -14 Stagnant

Alampur/ Dhulagarh 16 - 20 14 -18 High

Maheshtala 16-18 14-16 High

BBT road 20-24 18 High

Kolkata Warehouse major corridors

Kalyani

GT Road

Dankuni

Dhulahath,Alampur

UluberiaNH - 06

Dhulagrh to

Uluberia

Towards Mum

bai/ Chennai

Towards Delhi

Tow

ards

Sili

guri

BT Road

Sirakol

Duam

ond

Har

bour

Rd

Kaly

ani

Expr

essw

ay

Map Source: Google


City Population (Million)

Distance from nearest Port (KM)

Distance from nearest Airport

12 Hours Distribution Potential (Million)

Logistics Potential

Kolkata 14.2 0 15 153 High

Siliguri 2 560 12 162 Moderate

Haldia 2.7 0 126 147 Moderate

Durgapur 1.7 180 17 235 Moderate

Prospects

JLL have tried to analyse the Logistics potential for the key / nodal cities in Bengal on the basis of various

West Bengal is standing at a turning point of logistics revolution with lot of opportunities knocking the doors. Its

parameters like population, 12 Hrs distribution potential (number of people that can be reached in 12 hrs

time to see how the state improves its status on ‘Ease of Doing Business’ and adopts to the changing needs of the

time), distance from nearest port and airport.

sector and embrace growth.

Conclusion:Bengal’s Growing Logistics Potential

Higher infrastructure spending: INR 202 billion allocated in 2017 state budget for the purpose of infrastructure development

Cross-country distribution advantage: Bhutan border Road, Asian Highway II to improve the cross country distribution positioning of Bengal.

Inland Waterway Distribution Advantage: Proposed 1,620 kms long National Waterway 1 (NW-1) on Ganga from Haldia to Allahabad is inspected to add an extra logistics distribution model.

GST Push: Eradication of state boundary for distribution purposes has opened up opportunity to service East and 7 sisters of North East India, which is eminent from the growing developer and client interest in the region.

Opportunity for Logistics Developer: Lack of Grade A warehousing supply in the region eminently points out the investment opportunity for organized logistics developers of national and international repute.

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Feasibility & Market Study

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Formulation

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/ Disposal

Contacts

Surekha Bihani Managing Director, Kolkata [email protected] +91 98301 98054

N. Srinivas Managing Director, Industrial [email protected]+91 98454 45495

For Business Enquiries

Jones Lang LaSalle Property Consultant (India) Pvt Limited © 2018. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

About JLL, India JLL is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of 9300, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. The firm was awarded the Property Consultant of the Decade at the 10th CNBC-Awaaz Real Estate Awards 2015 and the Best Property Consultancy in India at the International Property Awards Asia Pacific 2016-17.For further information, please visit www.jll.co.in

About CREDAI Established in 1999, the Confederation of Real Estate Developers’ Associations of India (CREDAI) brings together more than 9000 Real Estate Developers from 151 city chapters across 23 states of India under a single umbrella. As the apex body for private sector developers, CREDAI has worked hard to make the industry more organized and progressive by networking closely with government representatives, policy makers, investors, finance companies, consumers, real estate professionals and developers.CREDAI’s code of conduct is adopted proactively by all its members and promotes self governance and ethical practices. CREDAI also updates its members about the latest industry data, technology advancements, industry benchmarks and international situation from time to time.

About JLLJLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the second quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of nearly 80,000. As of June 30, 2017, LaSalle Investment Management had $57.6 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.comJLL has over 50 years of experience in Asia Pacific, with 36,800 employees operating in 95 offices in 16 countries across the region. The firm won the ‘World’s Best’ and ‘Best in Asia Pacific’ International Property Consultancy at the International Property Awards in 2016 and was named number one real estate investment advisory firm in Asia Pacific for the sixth consecutive year by Real Capital Analytics and ranked among Fortune Magazine’s World’s Most Admired Companies list third year in a row. www.ap.jll.com

Ishita Kachru Senior Executive, Industrial [email protected]+91 7043140555

Acknowledgments: We would like to acknowledge the timely guidance and support rendered by Sudipto Pramanik, Gaurav Khaitan and Chandranath Dey from the Industrial Services team for strategic inputs in developing the content of this publication.

Sujash BeraManager- Industrial Services, [email protected]+91 98305 43922

Authors

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