Cargo demand in India is expected to boost the airfreight market to 2.8 million tonnes by 2018 with the present 5.5 per cent compounded annual growth rate, according to Frost & Sullivan, market research consultancy firm. The report indicates that most of this growth, however, will benefit foreign airlines which are the primary carriers of Indian export goods. Efforts are on to set right this anomaly of domestic carriers lagging behind and it is hoped that the draft National Civil Aviation Policy addresses the concerns of the air cargo sector.

With relaxation of regulations in foreign direct investment (FDI) in the aviation sector, the possibilities of international trade increasing are enormous and air cargo segment will be a major beneficiary. Frost & Sullivan’s Srinath Manda has said that major policies fuelling market growth include the allowance for 100 per cent FDI in existing airports and under automatic routes, as well as 100 per cent tax exemption for airport projects for the next 10 years.

Ecosystem needed

The report said that India’s merchandise export and import activity grew by an annual rate of 9.5 per cent, on average, from 2009 to 2013, which helped drive the nationwide demand for air cargo to 2.26 million tonnes in FY 2014. This growth could be certainly better but for the many issues that are holding back the sector. There is a perennial problem of lack of dedicated airfreight warehousing facilities at major airports. As a result, most warehousing facilities that exist cater to international, rather than domestic, cargo. Restrictions imposed on providing licences to operate bonded warehouses has been causing severe capacity constraints and impeding the air cargo market.

Gulf carriers dominate

As mentioned the Middle East airlines have captured the Indian international air cargo market. According to the International Air Transport Association (IATA) Industry Forecast 2014-18, India has emerged as the second fastest growing air cargo market after the Middle East and is expected to grow at a compound annual rate of about seven per cent over the next five years. The Middle East airlines with their global connectivity have dominated the Indian air cargo market. Emirates SkyCargo is the leader. Emirates operates 185 weekly passenger wide-bodied flights serving 10 destinations across India providing the Indian market a pan-India business opportunity for exports and imports. In addition, it operates two freighter services a week from India; one weekly turn-around freighter B777F service from DWC to Mumbai and back and the second B777F service operates from DWC to Chennai and onwards to Hong Kong. The other Gulf carriers—Saudia Cargo, Qatar Airways Cargo, and Etihad Airways Cargo are aggressive in their air cargo operations.

E-commerce, changing dynamics

The good news, however, is that the e-commerce sector is driving air cargo business to new heights for domestic airliners. “With e-commerce expanding and ‘Make in India’ initiative fuelling growth of domestic cargo, in addition to access to over 100 destinations through Etihad’s Abu Dhabi gateway, Jet has the opportunity to do well on both origin-destination and transshipment cargo,” said Bharat Thakkar, past President of Air Cargo Agents Association of India and Joint Managing Director of Zeus Air Services.

If the domestic carriers and also the airports have to benefit from the wave of economic growth in India, then a lot needs to be done on the part of the government in terms of policies and infrastructure creation.

Draft Policy – Features

The draft National Civil Aviation Policy has outlined several measures to prop up the sector as it believes that promotion of air cargo is a key objective of the government, given its importance from a ‘Make in India’, e-commerce and exports perspective. Revenue from air cargo helps airlines subsidise the cost of passenger tickets and take flying to the masses.

The draft policy acknowledges that air cargo has a high employment potential, especially for semi-skilled workers. Currently air cargo volumes in India are extremely low as compared to other leading countries due to high charges and high turnaround time.

The following framework is expected to ensure growth of air cargo business:

• Air cargo will be accorded ‘infrastructure’ status if co-located with an airport and will be eligible for Sec 80IA benefits.
• The Air Cargo Logistics Promotion Board (ACLPB) has been constituted to promote growth in air cargo by way of cost reduction, efficiency improvement and better inter-ministerial coordination. The Board and the industry will submit a detailed action plan after stakeholder consultation, with the objective of reducing dwell time of air cargo from ‘aircraft to truck’ to below 24 hours by December 31, 2016, and to 6 hours by December 31, 2017.

Paper-less air cargo

• ACLPB’s action plan should ensure a shift to paper-less aircargo processing by April 1, 2017.
• ACLPB will develop Service Delivery Modules for all elements of the air cargo value chain – airlines, airports, terminal operators, Customs House Agents (CHA), freight forwarders, and government agencies like Customs, Central Industrial Security Force (CISF), quarantine officers, etc.
• The government will streamline and simplify customs procedures.
• The Bureau of Civil Aviation Security (BCAS) will continuously review and simplify security procedures for air cargo in light of the changing business dynamics and evolving technology, while ensuring adequate checks and balances.
• Advanced Cargo Information (ACI) system will be implemented by April 1, 2016, to facilitate faster processing by customs, security agencies and terminal operators.
• The Ministry of Civil Aviation (MoCA) plans to leverage the untapped trans-shipment opportunity. The ACLPB will propose specific action steps to promote trans-shipment and the same will be monitored by MoCA on a bimonthly basis.

Increased airport space for cargo

• The space allocated for cargo on the air-side and city side at most Indian airports is inadequate. ACLPB will lay down norms for space allocation for air cargo for all greenfield airports. The action plan for space-augmentation at existing airports will be developed by ACLPB on a case by case basis.
• The government will endeavour that all relevant Central Government authorities are available under one roof, at the cargo terminals. These include the Ministry of Finance (customs), Ministry of Environment and Forests (wildlife clearance for handicrafts, etc), Ministry of Chemicals and Fertilisers (drug controller), Ministry of Agriculture (plant and animal quarantine), Ministry of Culture (Archaeological Survey of India) etc. Clearances will be given promptly and online after necessary checks.
• The government has commenced 24 x 7 customs operations at several airports. However, it has not been utilised optimally by industry. ACLPB will work closely with industry and propose action steps to spread out cargo handling round the clock.
• ACLPB will promote global good practices like free-trade warehousing zones (FTWZ), air freight stations, bonded trucking, dedicated cargo airports, etc.
• Freighter aircraft suffer from low priority accorded in terms of time slots and parking bays. ACLPB will lay down norms to address the issue.
• ACLPB will lay down specific norms and penalties to minimise pilferage, mishandling and damage of cargo.
• ACLPB will work with the Airports Economic Regulatory Authority (AERA) and the Airports Authority of India to ensure that user charges at Indian airports are competitive vis-à-vis competing aviation hubs. In particular for the nonmetro airports, the lease and other fixed charges levied by AAI on cargo facility will be kept low so that it does not become an entry barrier.
• The government will consider providing incentives for skill development of people employed in the air cargo value chain.
• AAI will be permitted to provide space on 10-year lease to operators of express cargo and freighters who may then develop dedicated infrastructure to improve their operational efficiency.
• MoCA will encourage development of cargo-villages near airports.

It remains to be seen what the industry is going to suggest and how the final policy will emerge as to prop up a sector which has such a crucial role to play in India’s emergence as an economic powerhouse.