The Hindu Business Line : Export infrastructure yet to take off

It is inevitable that as the cost of air transport plunges there will be an increasing shift of high-value low-bulk commodities from international sea-lanes to global air routes. But does the country possess the infrastructure to meet the potential air cargo export boom? The air cargo boom portends a fundamental shift in the Indian export profile, even as the traditional export sector has been metamorphosing to meet the changing global demand.

India's scorching 19 per cent growth in airfreight movement is passé. The country's elevation as the second fastest growing nation in air cargo transport, next only to China, is merely a stepping stone and not a milestone — in its climb to becoming an economic power house. But several intractable infrastructure bottlenecks remain; they have to be addressed, to achieve a high growth trajectory.

Hidden behind this spiralling growth profile is a deep-rooted transformation of Indian exports, which has far reaching implications for the economy. Rapid growth in air cargo movement often implies similar spurt in international air cargo services. But Indian imports continue to be fuelled mainly by surging petroleum and crude, which have been growing by over 40 per cent, year-on-year. The growth, in volume and value, of other imports has not been as significant. But that is not the case with exports.

Shift to air transport

The real effective growth for air cargo, by implicit analogy, stems more from the export sector. It is inevitable that as the cost of air transport plunges there will be an increasing shift of high-value low-bulk commodities from international sea-lanes to global air ways. Already, as much as 65 per cent of the country's air cargo movement emanates from the international sector. And it too has been growing at 19 per cent. But does the country possess the infrastructure to meet the potential air cargo export boom? Have we the airports, the storage and handling facilities, or the aircraft fleet to meet the potential demand? Not yet, but the handing over of the Delhi and Mumbai airports to private parties could be the first step to meet this huge promise and potential.

The air cargo boom portends a fundamental shift in the Indian export profile: From the era of high-bulk low-value to low-bulk high-value despatches. Gems and jewellery with its low volume and high-value is a classic case, growing by well over 20 per cent in recent years. In this age of rapid globalisation and liberalisation, the shift has been towards high-value, low-bulk ready-to-consume products. High-bulk, low-value exports have become redundant in today's rapidly changing world.

The transformation

And the traditional Indian export sector has been metamorphosing to meet this changing global demand. Several items in the export basket have been shedding weight and gaining value to become fit candidates for air transport, sooner or later. From exporting pepper, ginger, chillies and cardamom in bulk, the core constituent is today extracted and exported as spice oils and oleoresins.

Extracting the vital constituent of couple of kilogrammes of pepper into a small compact 100 ml bottle. Instead of exporting container loads of low-value fish, the country is increasingly turning to high-value live fish, crab and other crustacean exports. These transformations are also becoming one of the major driving forces behind India's export boom. But is the infrastructure ready?

The privatisation debate

A core argument against the privatisation of Mumbai and Delhi airports was that it would inflate the cost to the user, including to the exporter. Despite a paltry project cost of Rs 315 crore, the Cochin International Airport Limited was portrayed as charging Rs 300 user fee on outbound international passengers. Given the huge costs involved, what would be the case of Mumbai and Delhi airports, the antagonists asked? By implicit logic, high user charges seemed inevitable.

Phase I of the Delhi and Mumbai project alone entails a cost of Rs 2,800 crore and Rs 2,400 crore. In three phases, the total project cost will add up to Rs 7,961 crore for Delhi and Rs 6,131 crore for Mumbai airport. And the consumer is expected to foot this huge bill.

However, the Cochin airport made dramatic turnaround in just five years and posted a profit and revoked even the marginal fee charged on the small segment of the passengers.

But can the Mumbai and Delhi airports, with their huge costs, replicate the Cochin success story?

By the sheer volume of traffic generated, both in terms of passenger and cargo, the Cochin airport is dwarfed by Delhi and Mumbai.

Between them, these two major airports handled just below 50 per cent of the total air passenger traffic of the country, close to 60 per cent of the air cargo and just over 60 per cent of the total International air cargo. In short, the volumes generated by these two major airports are huge.

If need be, these airports could tap the huge and growing clientele and levy a nominal user-charge.

They could even forego this revenue given the diverse other sources open to efficiently operated airports.

This would make better economic logic for them as well, rather levying steep charges and driving away customers.

In doing so, these airports will take off on the high growth path, with concomitant economic benefits for the country.

More Stories on : Air Cargo | Insight | Exports & Imports

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