Despite a global downturn, India’s air cargo industry is looking up and the country is regarded as the international air trade hub of South Asia. Moreover, the e-commerce sector’s take-off is providing momentum to domestic air cargo growth. However, despite geographical advantages and the adoption of an open sky policy in the air cargo segment, the potential of international air cargo movement remains untapped.
Total air cargo traffic has been growing steadily, recording a compound annual growth rate (CAGR) of around 8 per cent between 2012-13 and 2016-17. This growth has been primarily led by improvements in the domestic cargo segment that has registered a CAGR of 9 per cent in the five-year period. During the same period, the international cargo segment grew at a CAGR of 7 per cent. During 2016-17, total air freight stood at 2.97 million tonnes (mt), of which the international segment accounted for about 62 per cent and the remaining 38 per cent was domestic freight. Further, during April-June 2017, international and domestic freight stood at 0.54 mt and 0.29 mt respectively.
The six joint venture airports in the country (Delhi, Mumbai, Bengaluru, Hyderabad, Cochin and Nagpur) together carry the largest share of domestic and international air cargo. In 2016-17, international freight recorded volumes of 1.44 mt while domestic freight was 0.73 mt. This is despite the fact that there are another 125 Airports Authority of India (AAI)-managed airports in the country. In a nutshell, while the growing numbers are reflective of healthy performance, there is still a long way to go for the cargo segment to reach its full potential.
NCAP lays the groundwork
Air cargo is one of the key policy areas covered under the recently launched National Civil Aviation Policy (NCAP), 2016. The focus is even more significant from the perspective of the government’s Make in India initiative, the growing e-commerce segment and export potential. The NCAP, 2016, envisages an increase in cargo traffic to 10 mt by 2027.
Key provisions for the cargo segment under NCAP, 2016, include:
- Formation of Air Cargo Logistics Promotion Board (ACLPB): The ACLPB has been constituted to promote both domestic and international air cargo and express delivery services. The board will promote growth in air cargo by way of cost reduction, efficiency improvement and better inter-ministerial coordination.
- Reduction in dwell time: One of the key issues plaguing the segment’s growth is the high dwell time of cargo at airports. To this end, the ACLPB will submit a detailed action plan to reduce dwell time of air cargo to under 24 hours by December 31, 2017. The Ministry of Civil Aviation (MoCA) has had dwell time studies conducted recently at six major airports to identify the reasons for the higher dwell time at Indian airports and the corrective actions required. Further, the “free period” for air cargo has been reduced from 72 hours to 48 hours with effect from April 1, 2017.
- Dedicated air cargo subsidiary: In a bid to tap the cargo segment more fully, AAI has set up a wholly owned cargo subsidiary, AAI Cargo Logistics and Allied Services Company Limited (AAICLAS). Initially, the subsidiary will have an equity base of Rs 200 million and a team of 60 people, which will be increased as per requirement. The subsidiary, though owned by AAI, will be functionally and administratively independent. It will provide services for ground handling, documentation, transport for bonded and non-bonded cargo, screening and related value added services at airports both in India and abroad. The new company hopes to achieve a turnover of around Rs 3.8 billion in the next two years.
Besides, the NCAP, 2016, has mandated that air cargo be accorded “infrastructure” status, if co-located with an airport. Further, in a significant step (and in line with the government’s Make in India initiative) the new policy has recognised express delivery services as a separate segment within air cargo, owing to its distinctive nature and processes.
In order to increase segment growth, it is imperative to bridge the existing gaps. Importantly, the issue of poor cargo handling facilities at airports needs to be addressed. Further, the lack of ground infrastructure to carry, store and clear cargo such as warehouses and cargo bays also needs to be dealt with. Growth is impeded by a lack of proper cargo warehousing facilities and multimodal links for local distribution, in spite of the increasing number of airline companies that are attempting to leverage the potential of the air cargo segment. Besides, there are very few airlines which have freighter aircraft of their own, with the exception of Blue Dart and Quick Jet.
The overall outlook of the air cargo segment remains positive. Industry analysts suggest that India will be among the 10 largest international freight markets by 2018. Policy reforms such as the privatisation of airports, increased foreign investment, etc., bode well for the segment. However, a comprehensive air cargo programme will be a prerequisite for propelling the growth of airfreight in the country.