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.
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