Is Indian Domestic Air Cargo Taking the Lead?

Could it be that the Indian tiger has either lost interest in its prey or has blunted its claws?
India, once hailed as the “only“ up-and-coming economy in the Far Eastern region, seems to have slowed down compared to its Far and Middle Eastern neighbours.

Many plans since the elections
The new government elected in May of this year gave high expectations of a sharp rise in GDP, far reaching reforms within industrial circles and more important, a system which is really transparent to the nation and future investors.

All of this was sincerely aimed for but little movement has so far to be seen in these directions. One of the most pressing problems in putting these goals into motion, especially within the aviation sector, is most probably the continued lack of expertise in understanding and dealing with the increasingly complex subject matter of civil aviation. It is quite clear that an independent autonomous civil aviation authority is urgently needed given that the aviation sector is set to boom in the country. Such authority needs to be manned by a permanent cadre of civil aviation experts and not retired officers on secondment from other departments.

Domestic Air Cargo to the forefront!
This does not necessarily mean that Indian aviation is at a standstill. The government has taken good initiative in making sure that besides the metro city, the airport terminals at tier 2 and tier 3 are modernized and improved in their design. The growth will come from such cities and it is important that infrastructures at these airports are improved.

It’s not that long ago that the Indian Secretary for Civil Aviation, Shri Ashok Lavassa, gave clear directions for drawing up plans to increase domestic cargo terminals throughout the country. In this case, a total of 24 airports were identified for future development as Domestic Air Cargo Terminals. Indian domestic air cargo reached 840,000 tons in 2013 and is expected to grow by a further 20% this year having already reached 500,000 tons by mid 2014.

Movement of air cargo domestically was not considered a serious option because of perceived high cost, lack of infrastructure at most airports and connectivity issues to tier 2 and 3 cities and towns. However, with the growth of the domestic airline network to a large number of the so called tier 2 and 3 areas, air cargo is looked at with great interest by shippers. Also the move to increase domestic handling space is seen in part as being necessary due to the continued overloaded road infrastructure throughout this vast country. While the road infrastructure has improved considerably over the last few years, the road transport faces severe delays due to a myriad of laws and regulations for goods moved by road.
The railway system is largely suitable and used for movement of commodities and not so much for small parcels and shipments.

Pharmaceutical and other sensitive goods, as well as the booming e-commerce market are going to have to rely more and more on speedy modes of transport.
Hence, the plan to grow domestic air cargo handling facilities.

An interesting example in this case is Mangalore airport, formerly known as Bajpe airport, which is situated on the south western coast of India.  At this relatively small airport cargo facilities have been added which can handle up to 13,000 tons of domestic export and 18,000 tons of domestic import cargo. This alongside space for the handling of 13,000 tons of international export cargo.

Firm plans for development of domestic cargo handling facilities are underway at 12 other airports so far. All these airports are within the control of Airports Authority of India.

Is international air cargo lacking behind?
Whilst the growth is not as expected, international air cargo is growing along the lines of last year. This is largely led by the increase of pharmaceutical products out of India. Import is also increasing again due to the growth of mobile phones and such high value items on demand by the growing consumerist middle class. Infrastructure facilities at most airports in India have been developed further over the past years and are said to be keeping pace with growth. What is important to note is that besides the four or five large airports of Mumbai, Delhi, Chennai, Bangalore and Hyderabad, other small cities are moving onto the international air cargo map with direct connections from these areas to the Middle East, Europe and Far East. In this regard it is important to mention the potential of Ahmedabad airport whose growth places it as one of the airports of the future due to the high level of industrial development in its regional hinterland.

As far as air cargo in India is concerned - it represents only 10% of the airline industry revenues - and only 1% of the goods traded internationally are moved by air.

Industrial boom still expected
The government is adamant about the fact that there will be a boom in economic activity and that the demand for transport and logistics solutions will increase even further. Various reports issued during the past few years all highlight the urgent necessity of developing the logistics infrastructure to align itself to the growth in international trade. The much needed tax reform in indirect taxes, namely the Goods and Service Tax (GST) which would have made India a single market, has not taken off due to continuing differences between the central and state governments. The primary issue is the lack of fiscal control over tax matters which the states consider as being their constitutional right under the Indian federal structure. The GST would merge a myriad of taxes levied on goods at various stages, such as excise duty at time of production, sales tax at time of sales, octroi tax by municipal corporations when goods enter city limits. The list is endless.
State level tax is one of the major reasons why companies have large numbers of warehouses and distributions centres across various cities with the idea to save taxes or ease distribution worries.
Reform of all of the above is needed if India is to fulfill the wishes of the new Prime Minister to make India the manufacturing hub of the world.
But - will this reform ever get off the ground in time?

The main question today still remains as to whether these topics are being actioned and whether they are in the right hands. The Prime Minister’s office is said to be closely monitoring the infrastructure sector and there is a serious review being made of all departments to see that there is no slack occurring.

John Mc Donagh & Radharamanan Panicker