Clearing cargo through the clutter

Xavier Britto is not new to taking risks. As a professor in Chennai’s prestigious Loyola College, he had taken a big one when he decided to become an entrepreneur. Now almost three decades later, the Chairman of Indev Group of Companies has once again taken a gamble by launching India’s first private air freight station (AFS) in Chennai on August 1.

And it’s not going to be a cakewalk. After all, the air cargo industry had to wait nine years for an effective air freight station to become a reality. Also, a lot would depend on the patronage of multinationals operating in and around Chennai.

But first, what is an AFS and why is Chennai keen to have one?

The AFS is like what a container freight station is for ports — it is an off-dock cargo handling facility. The moment cargo is off-loaded from an aircraft in the form of a unit load device (ULD, a type of container), it is directly moved by road to an AFS where cargo ‘de-stuffing’ is done. Customers then take delivery of the cargo after Customs clearance.

It is the reverse in exports. Cargo stuffing can be done in the AFS, where the Customs can also clear it. The cargo is moved to the airport to be loaded onto an aircraft after security clearance.

In cities with huge airports like Bengaluru or Delhi, there may not be a need for a separate AFS. But the Chennai terminal, which handled 2.22 lakh tonnes of cargo in 2014-15, just doesn’t have the space or capacity to handle the huge volumes.

N Sivasubramanian, Chairman, Air Cargo Agents Association of India (Southern Regional Council), says a private AFS will be a boon to trade and help it reduce transaction time and costs.

The AFS idea was put forward in 2006 following sustained growth in air cargo traffic in the Chennai air cargo complex. India’s first AFS inside the Central Warehousing Corporation started in 2007, but failed to take off as various stakeholders, including airlines, could not read from the same page on different issues.

G Raghushankar of International Clearing & Shipping Agency said things had come to a head in 2006 when the storage became inadequate after the arrival of multinational companies like Nokia in and around Chennai.

The lack of storage meant that expensive electronic goods like mobile components and laptops were sometimes kept in the open for days. It was then that the Director General – Trade Facilitation and other senior authorities rushed to Chennai in November 2006 to meet the stakeholders and find a lasting solution. The Air Cargo Agents Association of India, the Board of Airline Representatives, and the Chennai Custom House Agents Association suggested that an AFS be set up at an off-airport location. But the AFS failed to take off as AAI decided to retain a large part of the revenue and thereby making operations unviable for CWC and its contractors. As a result, the facility handled few imports over the years.

Which is why the Indev AFS has a lot riding on it—its success will in turn induce many others to enter the fray. “Our handling cost will be 15-20 per cent cheaper than at the airport,” says Britto, adding that activities like Customs documentation and examination, cargo acceptance checks, security checks, cargo palletisation and warehousing will be carried out at the Indev AFS.

Also, Indev has assured five days of free storage compared with the 72 hours allowed by AAI. "A well-designed automated infrastructure, supported by user-friendly processes will be a relief to customers facing multiple challenges at the cargo terminals," said B Govindarajan, Chief Operating Officer, Tirwin Management Services, a Chennai-based aviation consultancy firm.

Sources said that of the eligible payment of ₹4.72 per kg of import, the AAI will be paid ₹2.50 towards terminal, processing and storage charges. Indev will be responsible to move the ULD from the airport to the AFS.

J Krishnan of Natesa Iyer & Co, a freight forwarding company, said in developed countries the AFS has been in vogue for many years. The airport is used as a transit point and not a place to store the cargo. It is only in India that cargo is stored at airports.

The success of Indev AFS at Irungattukottai, which has many telecom and automobile units nearby, will ultimately depend on customers willing to move their cargo to the facility. However, for this, Indev should offer not just better handling rates but also exceptional service.