India’s burgeoning cargo industry needs tech and digitalization boost to reach potential

The country’s cargo tonnage and revenue increased by 520% in recent years but Indian freight forwarders believe more can be achieved if the government can provide better infrastructure and tech-forward digital systems for both imports and exports.

By R. Chandrakanth

Despite regulatory and operational constraints in some of the Indian airports, the freight forwarding community is gung-ho about the potential that exists, both in imports and exports. The reason for this optimism is pretty clear – Indian airports have done good business in terms of cargo capacities and tonnage carried and are expected to do better, even as the government is emphasizing capacity building.

In 2022, Indian airports carried 3.1 million tonnes of freight, up from 2.5 million tonnes in the previous year. The increase was noticed in both international and domestic freight, the former registering an increase of 29% (1.9 million tonnes) and the latter by 24% (1.2 million tonnes).

Mumbai airport which is stressed out infrastructure-wise, nevertheless, saw a 40% increase to 214,054 tonnes and this is attributed to the thriving Indian economy.

Indian Civil Aviation Minister Jyotiraditya Scindia, impressed by the 520% increase in cargo revenue, said the private sector, if it wanted to achieve the 10 million metric tonne targets in cargo, had to join hands with the government and also focus on the transportation of smaller cargo loads from Tier-II and Tier-III cities to metros. The government is establishing as many as 33 new domestic cargo terminals by 2024-2025.

Enthused by this potential, the Federation of Freight Forwarders Association of India (FFFAI) has been representing the government to overcome some of the infrastructure and regulatory hurdles that persist, even while it is internally encouraging the freight forwarding community to go digital.

Untapped regional markets

The Chairman of FFFAI, Dushyant Mulani, told Air Cargo Update the air freight sector has been having a good compounded annual growth rate (CAGR) of over 5.5 percent and has the potential to expand as Indian manufacturing is coming of age. “Engineering goods, pharmaceuticals, information technology products, perishables and E-commerce, all are witnessing good growth.

Besides, India, which is recognized as a good transhipment hub, can provide transportation and logistics services to the neighboring countries of Nepal, Sri Lanka, Bangladesh, Vietnam, etc.

Mulani said this regional market has been largely untapped. “The capacities are there and if the proposed 33 domestic cargo terminals materialize, then it further opens up opportunities.”

Even while the present dispensation is trying to improve the logistics sector through various initiatives like UDAN (enabling regional air connectivity), Gati-Shakti (power of speed, improving logistics performance), etc, there are major infrastructural gaps.

“Take for instance, the Mumbai airport, it is stretched and stressed dealing with passenger and cargo growth, with almost no infrastructure development in decades. We are hoping that the Navi Mumbai airport which is slated to go operational at the end of 2024, will be able to facilitate increased cargo movement,” said Mulani.

Mumbai needs another airport fast

The Chatrapathi Shivaji International Airport in Mumbai is a mess, where both passenger and cargo movements are pathetic, to say the least.

“Mumbai infrastructure is very poor. Private players have not invested, unlike how the airports in Bengaluru, Hyderabad and New Delhi have done. Mumbai needs to gear up. The man-hours lost because of infrastructure issues are substantial. The only improvement we have seen has been the introduction of temperature-controlled systems, otherwise, there has been no improvement since 1995,” Mulani noted.

Despite these hurdles, Mumbai has achieved commendable cargo growth, as the city happens to be one import EXIM gateway.

In FY 2022, Mumbai airport registered a 26% increase in international freight to 556,899 metric tonnes, while Hyderabad saw an 18 % increase to 75,546 tonnes. As regards domestic cargo, Mumbai witnessed a 40% increase to 214,054 tonnes and Hyderabad saw a 38 % increase to 64,529 tonnes, as compared to the previous year. The top three destinations that observed the highest imports via Mumbai airport included China, Germany and the USA.

While hailing the government’s plans to develop multi-modal logistics parks (MMLPs), Mulani mentioned that the cost of operations for those leasing properties here needs to become economical.

“The cost of operations is high and unviable for many medium and small businesses in some of the parks. The new MMLPs have to keep that in mind, otherwise it does not make economic sense,” said Mulani.

Talking about the phenomenal growth of the e-commerce sector, Mulani mentioned that it has huge potential as not all imports come through the ‘courier channel’. Most of the products take the normal cargo channels – air freight or by sea – where the clearances are much faster.

Mulani said there are many issues that the regulators need to sort out, one of which is the dwell time of cargo. “We are working closely with the Central Board of Indirect Taxes and Customs (CBIC) and a time-release study analysis has been done. Time-bound clearances are urgent and it has to be a joint effort of the trade/industry and customs,” he said.

The freight forwarders have to be compliant with a lot of agility. They should pay customs duty online and on time, ensure that there is timely segregation of goods with the custodians, keep the documentation in order, among other things, if they have to see clearance of imported goods within two hours of arrival.

Mulani said unless the government comes up with a mandatory diktat that all stakeholders have to go digital, the adoption rate will not be as desired.

“The Customs department has gone digital, but other stakeholders, including some custodians such the Plant Quarantine unit, Assistant Drugs Controller, etc. are yet to go fully digital. Yes, the freight forwarders too have to move to the digital mode, away from all the paperwork. The FFFAI is actively working with the CBIC, the Directorate General of Foreign Trade, the Ministry of Civil Aviation, and the Shipping Ministry on the areas that need to go digital, starting with licensing,” he said.

The FFFAI regularly conducts training programs, seminars, and workshops, among others, to encourage the freight forwarding community on various compliances. “But I believe, the government should make it mandatory for all stakeholders to go digital, leaving it to the stakeholders will be a gradual process as firstly it requires a mindset change. The government should take a clear position,” said Mulani.

During the pandemic years, the cargo sector emerged as a promising area not just for Indian aviation but for global aviation and there was accelerated adoption of digitalization, which now has slowed down.

The Indian cargo sector which saw a growth rate of 9-10% since 2013-14, witnessed a huge jump in the last two years, registering 520% increase in cargo revenue. The cargo revenues touched Indian cargo revenue was at $2.4 billion with 3.1 million metric tonnages having a CAGR of 13%. Today, India has 21 international and 35 domestic cargo terminals.

The Minister said, “Air Cargo had started as an underdog during the difficult Covid times but the industry was able to adapt and change to the new environment. During the times of Covid, we have rapidly expanded from having 7 Cargo Freighters to 28 Cargo Freighters in a short period of 3 years.”

The Minister said it was imperative to work on ease of doing business in the cargo sector by making processes paperless, adapting automation, and digitalization which can make cargo processing swift.

The Ministry of Civil Aviation will be spending close to $11.76 billion over 4 years in terms of setting up new greenfield airports and expansion of existing brownfield airports. Out of this, $7.44 billion will be invested by the private sector and $4.32 billion by the Government of India through the Airports Authority of India.

The Minister gave the example of jackfruit from Tripura which is finding market in the United Kingdom and Germany while King Chillies and Lemon from Assam are getting exported to London. This is a classic example of A2A i.e., Agriculture to Aviation, the link of two seemingly unrelated sectors being linked due to air infrastructure now coming up in remote areas in the country. It is for the freight forwarding community now to tap into these opportunities.