FREE TRADE WAREHOUSING ZONES

FREE TRADE WAREHOUSING PRIVATE LIMITED CORE 4 B, 4th FLOOR

INDIA HABITAT CENTRE LODHI ROAD

NEW DELHI – 110003 Ph-011-24682060-64 Fax-011-24682070

Table of Contents

1 Free Trade Warehousing Zone – Concept.......................................................... 1

2 FTWZ: Warehousing of a different nature ........................................................ 2

3 FTWZ Locations ................................................................................................... 3

4 Typical Zone – Facilities and Standards............................................................. 5

5 Benefits and Incentives of FTWZ........................................................................ 7

6 Prospective Users ................................................................................................ 10

7 Developers / Promoters....................................................................................... 11

8 Questionnaire ...................................................................................................... 12

1 Free Trade Warehousing Zone – Concept

1.1 In its ongoing endeavour to accentuate the growth of the economy, and understanding the

importance of providing enabling infrastructure for improvement of Foreign Trade, the

Government of India introduced the Free Trade and Warehousing (FTWZ) Policy (Section

7A), pertaining to the development of FTWZs, as a part of the Foreign Trade Policy (FTP)

2004–2009.

1.2 The primary objective of the FTWZ policy is to create trade-related infrastructure to

facilitate the import and export of goods and services with the freedom to carry out trade

transactions in free currency. The scheme envisages creation of world-class infrastructure

for warehousing of various products, state-of-the-art equipment, transportation and

handling facilities, commercial office-space, water, power, communications and

connectivity, with one-stop clearance of import and export formality, to support the

integrated Zones as ‘international trading hubs’.

1.3 The FTWZ is envisaged to be developed along the lines of a Special Economic Zone,

wherein the area under development would be classified as a deemed foreign territory, and

the units operating within the zone would be accorded special status and provided fiscal

and non-fiscal benefits. However, while the SEZ has been conceived with the express

intent of facilitating the growth of export oriented manufacturing units, the FTWZ policy

has been evolved to provide much-needed infrastructure required for trading and storage

activities relating to foreign trade.

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1.4 The FTWZs are given the status of deemed SEZs and will be governed by the SEZ Act

2005 and the SEZ Rules. The units located within the FTWZ would be provided with

significant benefits as available to the units in SEZ, the activities permitted within the Zone

would be limited to packing, de-stuffing, knitting, splitting and other activities required for

storage.

2 FTWZ: Warehousing of a different nature

2.1 The key differentiator between an FTWZ and a standard warehouse is the unique product

offering wherein the benefits of a free zone are integrated with professionally handled, high

quality physical infrastructure, thereby providing an ideal platform for the successful

proliferation of trading and warehousing companies in a globally competitive scenario. It is

perceived that by development of such a zone, the quality of infrastructure will improve

thereby reducing the logistics cost across the industry groups. Benefits that would come

with FTWZ include common facilities such as cost effective skilled labour, transportation

facilities, customized warehouse, sophisticated equipments etc.

Standard Warehouse FTWZ

No regulatory benefits All benefits of a free zone

Fragmented Concept Integrated Concept

Limited Professionalism Professional Management

Internal Infrastructure - developed on ad hoc basis

Infrastructure – provided based on needs of commodity groups

No shared infrastructure Shared infrastructure availability (storage/ equipments, etc)

Customized office facilities may not be available in proximity

Customized office facilities available within the development

No duty deferment benefits Duty deferment benefits

Normal equipment availability World class equipment availability

Support infrastructure – not in control Support infrastructure – under zones control

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3 FTWZ Locations

3.1 The FTWZs are proposed to be located at strategic sites chosen on the basis of the

following parameters:

o Trade throughput

o Current level of industrialization

o Connectivity

o Land availability

o Future growth

3.2 The sites identified for the proposed FTWZs are Greater Noida, Kandla, Haldia, Mumbai,

Ennore and Cochin. Among these, Greater Noida serves the entire hinterland of Northern

India and Western parts of India. The remaining five are ports; with Mumbai serving

almost 58% of the total container cargo handled by all major ports. Kandla was created to

ease the traffic at Mumbai port and it serves as the gateway for the West and North of

India. Haldia on the other hand caters to a vast hinterland that comprises of almost half of

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the Indian states (whole of eastern and north eastern regions) and the two neighbouring

countries of Nepal and Bhutan. Ennore has been created as a support to the Chennai port.

Cochin being the closest port to the Grand Container Trunk Route has been the choicest

locations for the Southern India.

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4 Typical Zone – Facilities and Standards

4.1 The FTWZ is positioned as a logistics and distribution centre providing a ‘Free Zone’

environment that integrates various aspects of logistics operations along with provision of

high quality infrastructure, thus enabling an efficient operational environment for trade

facilitation.

4.2 Free Zones offering trading and warehousing infrastructure is a well-established concept in

the global trade and warehousing arena. The model has been well accepted and has

exhibited a history of providing substantial encouragement to the foreign trade and

warehousing activity. This fact is supported by globally recognised successful examples

such as Jebel Ali Free Zone (UAE), Curacao (Netherlands Antilles), Colon Free Zone

(Panama), SAIF Zone (UAE) etc.

4.3 The FTWZ is expected to have world-class infrastructure facilities as per the global best

practices being adopted by the Jebel Ali Free Zone, Port of Rotterdam and Distriparks of

Netherlands, Sharjah Airport International Free Zone (SAIF).

4.4 The Zone is expected to maintain superior quality standards by housing top of the line

product offerings and world-class facilities. Some of the key product offerings that would

be potentially available in a FTWZ are:

Customised categorised warehouses ~ chemicals, food, electronics, oil, etc.

Sophisticated freezer / cooler facilities

Break bulk, containerised, and dry cargo storage facilities

Controlled humidity warehouses

Enhanced transportation facilities

World-class information system for cargo tracking etc.

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In addition to the facilities highlighted above, the zone would also make available general

support facilities, for the effective storage and movement of cargo. They are highlighted

below:

Counterbalance forklifts

Cranes & Grabs

Stackers

Push carts, picking trolleys & bins

Shelves and storage bins

Strapping, electronic scales, etc

4.5 Further, since FTWZs will be developed in locations near ICDs, CFSs, Ports, railheads,

airports etc, convenient and effective movement of goods through air, sea, rail or road

would be facilitated thereby offering the users of the FTWZ, a superior infrastructure

platform thus enabling increased efficiencies.

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5 Benefits and Incentives of FTWZ

Benefits accruing through superior physical infrastructure viz. top of the order product

offerings and general support facilities are as follows:

a. Deferred Duty Benefits: Importers of goods into India have to pay significant duties at

the time the goods are brought into the country, irrespective of the final date of sale or the

final use (e.g. re-exports) of the commodity. However, in the event a company was to

establish its operations within a FTWZ, the customs duty would be payable only at the time

the commodities are sold into the DTA.

b. Delivery Time: As customs clearance procedures will be simplified for companies

located in an FTWZ, the delivery time would be significantly reduced. This would in turn

enhance commercial returns for such companies, as they can potentially command a

premium for faster and more efficient delivery of their products/goods.

c. Hubbing Opportunities: With the provision of efficient infrastructure and superior

operational dynamics, an FTWZ provides opportunities for companies to hub its operations

(i.e. service other countries) from the base.

d. Single-product storage facilities: FTWZ would provide users storage facilities that

would meet the specific requirements of each product category, thereby ensuring a safer

and more efficient environment for the storage of the products.

e. Income & Service tax benefits: The zone would provide exemptions on income tax as

highlighted in section 80IA of the income tax act. Companies providing services from

within the zone (such as logistics companies, warehouse/ storage providers, etc.) are

exempt from payment of service tax, thereby reducing the logistics costs to users within the

zone.

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f. Excise Duty Exemptions: All capital goods, spares, DG sets, packing materials etc.

sourced from the domestic market for utilization within the zone, is exempt from excise

duty, thereby providing significant savings

g. Support Facilities & Efficient Management: Companies located within the Zone would

be able to access efficient management services and international expertise made available

through such a development. Additionally, support facilities such as banking, insurance etc.

would be available for captive utilization within the development, thus negating the need

for the companies to develop/ arrange for such facilities. This would enable companies to

focus on their core competencies, thereby improving operational efficiencies.

h. Other Benefits: The FTWZ, in addition to the above benefits, would also provide

significant benefits to specific commodity groups as highlighted below:

Bulk Commodities: (such as fertilizers, dry chemicals, etc): As per current rules

and regulations, commodities such as fertilizers, which arrive in bulk, would have

to be bagged before transportation. As bagging of these products is a time

consuming activity and has a cost element involved, traders import fertilizer only

when they have a firm order from the domestic market. In the event such a facility

is provided in close proximity to the port, such goods may be stored in bulk, from

where the requirements of the DTA may be serviced as and when required. This

would also generate the potential of the base acting as a hub to service markets such

as Pakistan, Bangladesh, Sri Lanka, etc.

Export Commodities: As the zone would be designated as a deemed foreign

territory, exporters who send their goods through shipping lines using the zone as

their logistics hub, would be able to receive their bill of lading (from the shipping

lines) as soon as the product enters the zone, as all goods entering the zone would

be treated as deemed exports.

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Trading Exchanges: Provision of such a zone may facilitate the establishment of

trading exchanges such as the London Metal Exchange within the country, whereby

global traders may use the base as a hub for distribution. This would in turn reduce

the sourcing costs for local importers of Non Ferrous Metals, who currently source

their requirements from LME warehouses in Dubai and Singapore, as the products

would be physically available within the country.

6 Prospective Users

6.1 The primary intent of the FTWZ policy is to attract companies associated with trading and

related activities. A brief description of the four main categories of users is provided below:

i. Logistics companies

The FTWZ would attract various categories of logistics service providers (3 PL

companies). These include:

a. Shipping lines providing both transportation and warehousing,

b. Transportation companies providing warehousing, supply chain management

companies

ii. Pure play warehousing service providers

An FTWZ would attract companies that offer warehousing space as a part of their service

portfolio. These include several medium and large scale warehousing providers such as

CRL, Snowman etc. who provide liquid, dry cargo and other specialized warehousing

facilities such as reefer facilities.

iii. Trading companies

In view of the fiscal and regulatory benefits provided to the trading companies in form of

custom & other related duty deferments and interest cost savings, a significant section of

the users are expected to be traders.

iv. Manufacturing Units

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A significant number of companies prefer to undertake their storage/ warehousing needs

internally, and accordingly acquire and maintain their own storage space. These companies

may also utilize the zone to set up ‘mother-warehouses’ from where the products may be

moved to the manufacturing unit (in case of imports) or dispatched to the international

destinations (in case of exports) as and when required.

7 Developers / Promoters

7.1 MMTC Ltd. and IL&FS Ltd. have promoted a new company viz. Free Trade Warehousing

Private Limited (FTWPL) for undertaking the development and implementation of the

FTWZs across the country.

7.2 MMTC is a Government Of India (GOI) owned company and is one of India's leading

international trading companies with a turnover of around US $ 3 billion. Minerals, Metals,

Fertilizers, Coal, Hydrocarbons, Agro Products, Gold, Gems and Jewellery are the main

sectors of its activities. As the single largest importer and seller of all high quality Non

Ferrous Metals (NFM) like aluminum, copper, nickel, tin, antimony etc, MMTC offers

LME indexed NFMs, both off the shelf as well as on high seas.

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7.3 Infrastructure Leasing & Financial Services Limited (IL&FS) is an Investment Banking

Institution, promoted by Public sector Financial Institutions and Banks including UTI,

Central Bank of India and HDFC among others, with an objective, inter alia, of developing

projects in the infrastructure sector on commercial basis. IL&FS renders advice, develops

projects, identifies prospective promoters, undertake mobilisation of financial resources

from both the domestic Financial Institutions and multilateral agencies and participate as a

co-promoter in Infrastructure projects.

8 Questionnaire

1. Commodities traded by your organization /

firm (Import/ Export)?

2. Quantum of trade through India?

3. Commodities traded through India?

4. Future plans for commencing trade in any

other commodities?

5. Locations where your company has presence?

6. Where do you store the commodities after

import / before export?

- Owned / rented warehouses

- If rented, how much do you pay for the

facilities

- Location of existing facilities

- Quantum of space occupied

7. Any special warehousing needs (specific

ceiling height/ insulation/ humidity control/

etc.)?

8. Which major Indian ports of entry / exit do

you use?

9. Is the logistics (including transportation, and

storage) adequate for you needs?

10. Support facilities your company needs at the

warehouse for storage and in – warehouse

movement? (Forklifts/ cranes/ trucks/ etc)

11. What kind of value addition, if any, do you

perform in the warehouse (packing, splitting

etc.)

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12. Do you feel that keeping your products in the

FTWZ will protect you from international

product price fluctuations?

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13. Would you be interested in taking up space in

an FTWZ? What are the parameters that

would influence your relocation decision?

- Location

- Rentals and prices

- Infrastructure / logistics

- FTWZ benefits (duties etc.)

14. Any general or specific comments / observations on:

- FTWZ concept - Relevance for your company

/ organization - Facilities that you would

expect / desire to have at the FTWZ

- Any other matter