Positive Steps: Initiatives to tap the air cargo potential

Initiatives to tap the air cargo potential

The burgeoning demand for e-commerce, the need for speedy and timely delivery of cargo and the increasing air connectivity and opening up of routes, in recent years, have resulted in an increased demand for air cargo services. According to industry experts, air cargo volumes are set to increase by 60 per cent in the next five years. This highlights the huge untapped potential in the segment. Recognising the exigency, the government has taken a number of initiatives to strengthen the air logistics segment. The incorporation of AAI Cargo Logistics and Allied Services Company Limited is one such step. The initiatives are targeted at overcoming policy apathy, infrastructure bottlenecks and technological barriers currently prevailing in the segment.

Policy breakthroughs

National Civil Aviation Policy [NCAP], 2016: One of the biggest policy breakthroughs in the air cargo segment was the introduction of the NCAP, 2016. The policy recognises the need to expand India’s air cargo business by paving the way for a single-window clearance for cargo transportation. It also accords infrastructure status to those cargo facilities that will be co-located with an airport.

To further fuel growth in the air cargo segment, the Air Cargo Logistics Promotion Board (ACLPB) was constituted under the NCAP, 2016. The board will work towards reducing costs, improving efficiency and enabling better inter-ministerial coordination by focusing on three verticals – air cargo handling and allied services, warehousing and contract logistics, and air cargo road feeder and airfreight stations.

Another significant policy mesaure  is the recognition of express delivery services as a separate segment under air cargo owing to its distinctive nature and processes.

National Air Cargo Policy: For the first time, a dedicated National Air Cargo Policy is in the process of being formulated by the Ministry of Civil Aviation (MoCA). This is a major milestone for the airfreight segment as the policy aims at creating intermodal hubs to ensure seamless cargo transportation. It will also include a provision for earmarking sufficient land at the upcoming airports for cargo operations, besides developing air cargo transshipment hubs to source cargo from neighbouring states and partner countries. The draft policy has been put up for stakeholder consultation and suggestions.

Digital platforms

The boom in e-commerce has created the need for incorporating digitisation in airfreight services as well. Till now, high dwell time and the cumbersome process of air cargo bookings hampered growth in the segment. To overcome these bottlenecks, the MoCA launched two

digital platforms – Cargo e-Go and Rigel Kale – in March 2018. Cargo e-Go, developed by Hans Infomatic, is a single-window business platform for customers to communicate freely with cargo carriers and avail of services at the click of a button. Rigel Kale is a specialised e-booking platform developed by Kale Logistics Solutions to assist in assessing the route availability, rates and schedules for cargo bookings. Both the platforms are a step towards building a digital logistics marketplace for free and easy flow of cargo in the country.

Delhi International Airport Limited (DIAL) has also utilised information technology to facilitate easy cargo movement by reducing paperwork. It has launched a mobile application, DIAL Cargo, that enables the completion of air cargo business transactions using the mobile network. Through the application, customers can track the movement of shipments on a real-time basis, integrate messages received from the Customs Electronic Data Interchange System and the Directorate General of Systems and Data Management, and can receive electronic clearance of cargo through the customs department. The application provides authorised access to operators, customs officers, customs house agents, airlines and freight forwarders, among others.

Recently, in September 2018, Air India SATS Airport Services Private Limited launched a new shipment-tracking platform that uses radio frequency identification technology for its cargo handling operations at the Kempegowda International Airport, Bengaluru. This will enable real-time cargo tracking for end-to-end visibility and faster turnaround.

Capacity enhancement

The country’s constrained cargo handling ground infrastructure is the biggest impediment in the expansion of freight services. Inadequate space at airports to store cargo, and a lack of cargo warehousing facilities and multimodal links for local distribution is creating impediments in tapping the potential of the segment. In this regard, measures have been taken to augment infrastructure capacity. For instance, the Airports Authority of India (AAI) has identified 24 airports in Tier II and Tier III cities to develop common user domestic cargo terminals (CUDCT). One such terminal was inaugurated at the Trivandrum international airport in October 2017 and is capable of handling 200 tonnes of cargo per day. Moreover, a dedicated international courier terminal has also been developed at the airport, and is currently awaiting mandatory clearances from the customs authorities.

Besides, an air cargo complex for perishable goods will be ready at Indore airport by October 2018. Guwahati airport, which already has a cargo terminal, is set to get another CUDCT to cater to a rise in cargo movement from the Northeast region. The foundation stone for the terminal was laid on August 3, 2018.

In November 2017, a new international air cargo complex was inaugurated at Visakhapatnam airport. It is expected that three to four tonnes of cargo will be shipped from the airport and an MoU for this was signed with Shipra Logistics in June 2018. The Madurai international airport too commenced international cargo operations last year that gave the export of consignments from Tamil Nadu the required boost.

The MoCA is also promoting the development of cargo hubs in India. For this, greenfield airports are being constructed with cargo facilities. Mopa airport in Goa is one such greenfield airport that will have a cargo facility on its premises. Airport operators are developing transshipment facilities to enable the transportation of cargo to international destinations. Recently, in March 2018, Pune airport started its international transshipment facility. Under this facility, cargo is loaded onto domestic flights and transported to domestic airports that facilitate international exports. Jet Airways and SpiceJet are the two airlines currently exporting cargo from the facility.

Expanding footprint

SpiceJet is planning to launch dedicated air cargo services from September 18, 2018, with the aim of expanding its footprint beyond air passenger traffic. The cargo business will operate under the brand SpiceXpress. The carrier has planned the induction of a separate air cargo fleet comprising Boeing co 737 planes. According to plans, SpiceJet will transport letters, credit cards, blood, organs and medicines. Other shipments will include automobiles, apparel, consumer electronics, e-commerce products and live animals. Besides, perishables like fresh fruit and vegetables will be shipped to the Middle East.

In addition, a freight corridor between Mumbai and Kabul has been announced that will make cargo clearance possible in as little as two hours. This is subsequent to the first airfreight corridor established by India between Delhi and Kabul in 2017.

The way forward

According to AAI, total air cargo traffic is estimated to reach 8.75 metric tonnes by 2030-31, growing at a compound annual growth rate (CAGR) of around 7.6 per cent during 2020-31 and a CAGR of 9.3 per cent during 2012-32. Most of the air cargo growth during 2012-32 is expected to be driven by international cargo (approximately 61 per cent share). Here, the export of auto components, pharmaceuticals and processed food will be significant. Meanwhile, in the domestic cargo segment, the growth of the e-commerce, electronics and textile sectors will form the base for increasing numbers.

In view of the projected growth, the initiatives taken by the government will play a key role in meeting demand. However, a few gaps still need to be addressed. These gaps are in terms of cost of transportation and the taxes being levied. The cost of air cargo increases due to the lack of direct international cargo shipping facilities. Transshipment of cargo adds 10-30 per cent to costs thus rendering the services unviable. Therefore, the development of more international cargo terminals is urgently required. Further, taxes levied for air cargo should be at par with other logistics sectors such as roads which is subject to only a 5 per cent tax rate. The high tax rate of 18 per cent currently charged for air cargo is a major hindrance to the growth of the segment.