Smoother runway for air cargo logistics

At last, the air cargo logistics industry can look for some shiny days ahead. The way things are being speeded up suggests that the Government is serious about improving the industry’s standards to international levels.

First, the Government set up a working group consisting of officials from various departments and eminent personalities to look at issues from all angles. The group was asked to suggest ways to improve the industry, which handles nearly one-third of the country’s international trade.

Second, an Air Cargo Logistics Promotion Board, which would be an Inter-Ministerial Group, was set up to steer through the reforms suggested by the group.

‘first time’

One of the board’s frameworks is to lay down policy guidelines for setting up of air cargo facilities at airports and air freight stations/cargo villages, including guidelines for public-private partnerships for development of these facilities.

“Perhaps for the first time air cargo logistics has been identified to be a key industry as part of civil aviation sector and its role duly recognised,” acknowledges Dr Nasim Zaidi, Secretary, Civil Aviation, in the working group report.

The group in the 119-page report has dealt with minute details on issues plaguing the air cargo logistics industry. These include infrastructure bottlenecks at airports and delays in procedures.

Its recommendations require action from various Ministries, the Central Board of Excise and Customs, the Bureau of Civil Aviation Security, airport operators/custodians, carries, air freight operators, Custom House agents and the trade.

Take, for example, the dwell time, a performance indicator of cargo terminal operations in any airport. It is higher at airports in India than those in other countries because the permitted free period itself is 72 hours, compared with four to eight hours in countries such as Singapore and Hong Kong.

Untapped Potential

There is a significant untapped potential for air cargo in India. An indication of this is that the total air-cargo volume of 2.3 million tonnes (mt) handled in financial year 2011 by all Indian airports put together was less than that handled by individual airports such as Hong Kong, Memphis, Shanghai, Incheon, Anchorage and Paris.

The report says the demand for air cargo transport has increased significantly over the last few years, because product life cycles have shortened and demand for rapid delivery has increased.

Changing business models such as just-in-time manufacturing and global outsourcing models have contributed to the rapid growth of air cargo logistics business.

In such a changing business environment, where speed-to-market is a competitive imperative, movement of inventory is no longer viewed as a compartmentalised process.

Rather the sourcing of inputs, parts and components and the delivery of final product are all viewed as a continuous value-adding chain. Efficient supply chain management, therefore, offers significant benefits, including lower inventory and intermediary costs; and simplicity in order placement, delivery and management of suppliers and customers. These benefits directly contribute to making businesses more competitive.

Impressive Performance

India’s impressive growth in international and domestic trade over the past few years has augured well for the air cargo industry in India. Total cargo handled at Indian airports has grown 3.5 times in the past 15 years from 0.68 mt in 1995-96 to 2.39 mt in 2010-11, a CAGR of 8.7 per cent.

Domestic cargo handled has grown four times from 0.22 mt in 1995-96 to 0.89 mt in 2010-11, a CAGR of 9.7 per cent.

Similarly, international cargo handled at Indian airports has grown 3.2 times in the same period from 0.46 mt to 1.5 mt, a CAGR of 8.2 per cent. However, in the past three years, domestic cargo throughput is the fastest growing segment (CAGR of 13.6 per cent) as compared with international cargo throughput (CAGR of 9.2 per cent).

The Civil Aviation Ministry has forecast that the total cargo throughput at Indian airports is expected to grow 7.6 times in the next 20 years (CAGR of 11.2 per cent). Domestic cargo throughput is expected to grow 7.8 times (CAGR of 10.4 per cent) international cargo throughput is expected to grow 7.5 times (CAGR of 11.7 per cent) in that period. The transhipment segment has significant market potential, said the report.

If India should be on par with international players, it is important that logistics improves. In fact, evidence from the 2007 and 2010 Logistics Performance Index, developed by the World Bank, indicates that for countries at the same level of per capita income, those with the best logistics performance experienced an additional growth of 1 per cent in gross domestic product and 2 per cent in trade.

These findings are especially relevant today, as developing countries need to invest in better trade logistics to emerge stronger and more competitive. India’s rank on the index in 2010 was 47, down from 39 in 2007. In contrast, China’s was 27 and Brazil 41. This should be a matter of grave concern to India. Some of the important suggestions of the working group include setting up of air freight stations across the country to decongest airports and use of information technology to improve operational efficiency.

raja@thehindu.co.in

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