Global courier company United Parcel Service (UPS) is expanding in India with a focus on tier-2 and tier-3 cities. The US-based $53-billion logistics service provider is hopeful that the implementation of the goods and services tax will help simplify the flow of goods across the country. In an interview with Business Line , Mark-Martyn Fisher, Managing Director, UPS India, outlines the expansion plans and challenges facing the company. Excerpts:

How do you see the growth in logistics sector in India?

The growth in the Indian logistics sector has been strong. According to a recent industry report by India Ratings, a Fitch group company, the Indian logistics sector is growing at 15 to 20 per cent a year. It is expected to reach $350 billion by 2015.

There is growth in manufacturing sector in India, and much of the manufactured products are exported overseas to Europe and the Asia-Pacific region. That’s where logistics plays a key role — in connecting the manufacturers to their customers around the world.

How has the economic downturn affected the logistics industry?

The economic downturn has adversely impacted the sector. However, I don’t see the whole of Europe affected by it. Northern Europe is still a strong market. The US has remained strong. Also, South America, an interesting new market, is picking up. The real strength in global demand is, however, coming from the Asia-Pacific region.

What are UPS’ expansion plans in India?

We have opened up two new gateways in South India — one in Chennai and another in Bangalore. We recognised the need to reduce the time in transit to import products to these regions and move the clearing processes closer to where the businesses are.

We have also been looking at expanding in tier-2 and tier-3 cities to offer full range of our integrated services. In some small towns, the traditionally buoyant textile industry has given way to other industries such as the automotive parts industries.

We are also expanding our warehousing capacity. We built a new facility in Delhi in July this ye

ar. Before the year-end, we will also add another warehousing facility in Hosur, Tamil Nadu. This is all driven by specific demand and needs that we see in these areas.

Which sectors in India are contributing to the company’s growth?

I see a strengthening demand in the healthcare sector. This is a highly regulated sector, particularly because the products will be regulated in the destination markets. That lends itself well to UPS’ strengths in terms on-time delivery of products in good condition with full visibility.

The domestic healthcare sector will grow with a lot of new hospitals being built and growth in medical tourism.

Another area that we are really positive about is contract logistics, where the logistics for a large project is provided by a third party.

As India is developing, there is a much higher demand for high-technology equipment to run specific services.

It could be hospital or telecommunications equipment. These are critical equipment.

So, there is a need to supply spares quickly to engineers who maintain that equipment. We have been developing our contract logistics solutions for the past couple of years. Going forward, we will continue to focus on this business.

What challenges do you face in India?

Infrastructure is challenging in India. Also, the different taxation system across the States make it more difficult.

The Government of India is looking at it. We are hopeful that the single taxation policy, the goods and services tax, will become operational soon.

Also, we have seven flights operating out of Mumbai, which are the Boeing 747-400s, and have a high capacity. But curtailed length of the runway prevents us from operating at our full capacity.

It doesn’t give us the same load factors and increases operating costs.

The Mumbai airport is running at a shortened length at the moment.

As soon as the full length of the runway is available to us, it will make a significant improvement in our cargo-handling capacity.

Hopefully, in a few weeks we will get the full runway.

What are your acquisition plans in India?

We do not have any plans to acquire a local unit. However, any acquisition in a particular country also helps further our growth in the neighbouring countries.

For instance, our investment to build an air hub some time ago in China is important for our operations in the Asia-Pacific region.

All our aircrafts come from that air hub in Shenzen in China.

Even investments which are not in India but a part of that network have an impact on the services we can provide.

nivedita.ganguly@thehindu.co.in

satyanarayan.iyer@thehindu.co.in

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