Potentialising India’s dream as a Transit Cargo Hub

The unveiling of the much-awaited National Air Cargo Policy, earlier this year, has definitely heightened the expectations of Indian freight forwarders from the government, as the policy seeks to make India among the top five air freight markets by 2025, besides creating air transport shipment hubs at all major airports over the next six years. The policy also aims to leverage India’s geographical location as a transit hub between Europe and Southeast Asia and a gateway to the South Asian region. The policy will encourage code sharing/inter-line agreements between foreign and Indian carriers.

Transhipment cargo hubs at airports segregate cargo brought in by airlines for onward dispatch, facilitating its movement across the globe as per requirement. EXIM shippers and airlines get the opportunity to carry more volume of air cargo across the world by leveraging the transhipment facilities. A successful tranhipment and consolidation hub not just boost tonnages at the airport but also contributes to the growth of various ancillary industries linked to the airport.

In India, transhipment cargo hubs are the need of the hour, not just as the country continues to ascend in the rankings of the world’s largest economies with the size of its consumer market continuing to grow at a rapid pace but because the country will also play an increasingly important role as one of the Asia-Pacific region’s major economic growth engines, helping to drive Asian regional trade and investment flows. To achieve this, the country’s new economic roadmap has to prioritise the importance of creating a virtuous cycle of investment, savings, and exports in order to sustain rapid economic growth over the next five years.

In a first, Indira Gandhi International Airport (IGIA) – Delhi has launched a dedicated transhipment centre exclusively for cargo services. The facility named ‘Transhipment Excellence Centre’ is spread in the area of around 70,000 square feet and can handle estimated 20,000 tons of cargo in a month. Delhi International Airport Limited (DIAL), which runs Delhi airport, is the first to take up the initiative under the National Civil Aviation Policy 2016 which aims to develop air cargo transhipment hubs at major airports.

After Delhi Airport, the upcoming Noida International Airport Limited (NIAL) at Jewar is expected to be a major air cargo hub for India. According to the development plan of the Techno-Economic Feasibility Report (TEFR), NIA will be a transhipment hub for the country once it starts operations in 2022-23. As per the report, the airport is expected to cater to 2.5 million tons of cargo in the next two decades. The primary hinterland for NIA would include Mathura, Agra, Aligarh, Palwal, Greater Noida, Noida, Meerut, and Ghaziabad. Likewise, Rajiv Gandhi International airport that serves Hyderabad, located at the center of India’s production theatre with strong regional connectivity, is speeding along to become the country’s first full-fledged air cargo hub. Its advantage — more than 20 key Indian and other South Asian cities are less than two hours of flying time away and South-East Asian cities, such as Singapore, Kuala Lumpur and Bangkok, and Middle-East cities are just four hours away.

Can India become a Transit Cargo Hub?
Progress & Headway

Analysing the above, Videh Kumar Jaipuriar, CEO, Delhi International Airport Ltd (DIAL) remarks, “India’s air cargo sector has witnessed robust growth in the last couple of years. National Air Cargo Policy Outline 2019 has focussed on many initiatives aimed at making India among the top air freight markets in the world.”

Besides the establishment of the Transhipment Excellence Centre (TEC) on airside for seamless and efficient movement of transhipment cargo, Jaipuriar jots down the various initiatives Delhi Airport has undertaken, and which are in line with the focus areas including the government’s vision to strengthen bilateral trade relationship with the neighbouring countries:

• Delhi Airport is India’s first AEO (Authorised Economic Operator) certified airport by Indian Customs.
• In terms of availability of air cargo infrastructure to cater to growth, Delhi Airport has two air cargo terminals with 1.8 million MT cargo handling capacity per annum and scalable to 2.3 million MT. Delhi Airport has also developed on-Airport warehousing facilities with 30,000 sq m area to facilitate freight forwarders and other logistics companies at the airport.
• In FY 2018-19, the Delhi Airport handled 1.04 million MT cargo, the highest ever cargo handled by an airport in India.
• With a focus on pharma and perishable products, Delhi Airport has developed temperature-controlled facilities with 1.5 lakhs MT handling capacity comprising of multiple temperature range chambers.  It is the first airport in India to have cool dollies to carry cargo to maintain cool chain from terminals to the aircraft.
• Delhi Airport is India’s first ‘e-AWB360 Certified Airport’ by International Air Transport Association (IATA) for paperless cargo processing.

Meanwhile, highlighting the developments at Hyderabad airport, SGK Kishore, CEO, GMR Hyderabad International Airport Ltd (GHIAL), states that the airport is progressively working towards making Hyderabad a strong cargo hub.

Kishore says, “India’s air cargo business has been witnessing a CAGR growth of 11 per cent for the last few years. There are strong indicators for a robust market growth in India which are backed by business-friendly policies and ease of doing business. The new National Air Cargo Policy supporting industry policies such as National Integrated Logistic Policy (NILP), EXIM Policy, Free Trade Agreements, and Air Service Agreements have been paving way for the progress of air cargo business in India. Various factors such as stable growth, geographic locations, increased industrial production, multimodal integration, and well-networked logistic connectivity by air and road; India is all set to register growth by leaps and bounds where air trade is concerned.”

Kishore emphasises on GHIAL’s continuous endeavour to create requisite infrastructure facilities to rally towards this goal. Growing at the pace of double-digit cargo growth year on year, GHIAL has been taking steps towards expanding the existing facilities, adding new infrastructure, transhipment facilities, integrated express terminal, dedicated perishable facilities, packhouses and strong network- International and Domestic (Air and Road), multimodal connectivity and ease of operations in the air cargo terminals.

Satyaki Raghunath, Chief Strategy & Development Officer, Bangalore International Airport Ltd (BIAL) too opines, “Currently at BIAL, about one per cent of the total cargo volume is airside transhipment, including domestic-domestic (D-D), international-domestic (I-D), and domestic-international (D-I); (I-I is NIL). On the landside, transhipment through bonded trucking accounts for five per cent of BIAL’s international cargo volumes.” Raghunath says that they intend to develop a D-D transhipment zone on the airside in the medium to long-term. “Additionally, in the long-term, our aim is to have transhipment comprising between 15-18 per cent of our total cargo volumes. In order to facilitate transhipment from the hinterland/manufacturing zones, BIAL has introduced LOGI-Connect, a road-feeder service to transport bonded cargo from these catchment areas to the airport. The zones currently covered under this initiative are Tirupur, Coimbatore, and Ambur. Over time, we aim to extend this service to include Erode, Salem, Mysuru and the North Karnataka region,” informs Raghunath.

BIAL is also working towards developing a dedicated International Express Cargo Terminal. The Terminal will be India’s first dedicated express cargo terminal and will be spread across a land parcel of nine acres. The facility is expected to be functional by April 2020.

Tackling the impediments

India has the potential to play a much larger role in the air cargo market, especially with international carriers looking at Asia as a major growth driver for its air cargo business. However, the major airports in India, even after enjoying the geographical advantage and suitable location to serve as a transhipment hub, have not been explored to its full potential. According to Keku Bomi Gazder, CEO, AAI Cargo Logistics and Allied Services (AAICLAS), the reasons are customs and security policies and the absence of uniform transhipment handling procedures at major airports.  Another roadblock is the absence of a full-fledged air cargo hub backed by strong regional connectivity and road network for last-mile transportation. Gazdar says, “The transhipment cargo, which constitutes as much as 60-70 per cent of the total volumes handled by some of leading airports, is almost negligible for Indian airports. Therefore, adhering to the guidelines of the National Air Cargo Policy, the government has decided to mandatorily earmark the land for air cargo operations at the existing and upcoming airports. The infrastructure, connectivity, and ancillary facilities at major airports are being looked in to for a much-needed air cargo hub.”

Vipin Vohra, Chairman, Continental Carriers believe collective efforts are being made by the respective authorities and institutions to make India among the top five air freight markets by 2025. “Standard operating procedures (SOPs) are being developed to streamline processes. The government is working on this vision by removing all bottlenecks to promote the development of a last-mile/first-mile connectivity program at international/regional gateways, thereby reducing the time taken to promote faster movement of the goods through India,” he says.

Counting on the prospects of the National Air Cargo Policy, Ram Menen, Former Independent Director, Expofreight remarks, “The intent of the policy is good and has the right thinking behind it to achieve what the objective has set out in the document. The key to success will be to have a uniform application of rules, processes, and procedures pan-India. It should not be subjected to any local state influences. Infrastructures in and around the airports/industrial parks along with interconnectivity will be critical to success. Any bottlenecks and congestions around airports will be a major hurdle in transportation logistics. Uninterrupted road transport infrastructure is also quite important. Air capacity in domestic operations is still a challenge because of the high cost of operation of freighters. The government should seriously reconsider the taxation applied on aviation fuel which is a very large portion of the operating cost for an airline and challenges the viability of route profitability as the domestic yields are very low.”

Menen further adds, “Digitisation is key; human intervention, especially when it comes to border control and other regulatory processes should be kept to a minimum. It is very important that all airports and related authorities work with one common system which is for all players to access and interact with. The paranoia of data security can be overcome through the application of blockchain technology. Besides, E-commerce folks should be given preferential real estate around the airports to build their facilitation centers considering the fact that E-commerce is the highest growth segment of the air cargo industry.”

Meanwhile, industry veteran Bharat Thakkar, Joint Managing Director, Zeus Air Services, focuses on the progress and air connectivity and says that the promotion of domestic and international air cargo including express delivery services is a key objective of the Indian government. Over 160 airports currently fall into this category and following through on this initiative would improve regional connectivity across the nation.

“It is difficult to say exactly what scale of impact this will have on the logistics sector since most goods are still transported by road or rail. But, we can be assured that it would only be an improvement on the existing state of things. The reach of companies operating in the logistics sphere would increase if the logistics sector sees transport by air as a viable option,” tells Thakkar.

He also underlines the fact that air cargo amounts to above ten per cent of airline revenues and the e-commerce boom will boost domestic air logistics.

“Air cargo is suffering from a prolonged slump that has seen falls in yields, revenues, and market share. Since 2010, world trade has grown by 12 per cent whereas, air cargo demand growth has been basically flat with only a two per cent increase. A divergent trend in the passenger demand, with growth continuing in the historical five to six per cent range, has complicated the situation. As airlines grow fleet capacity to meet rising passenger demand, capacity has been introduced into weak cargo markets. Sensitive cargo also prefers the air. As the importance of the air cargo industry increases, so does the need for skilled freight forwarders to be able to cope with the high pressures of delivering goods in a customer-oriented or customised manner. Freight forwarders thrive at skillfully answering their clients’ needs and consistently delivering the best combination of price and quality. Finally, the e-commerce boom will boost the domestic air logistics,” he adds.

Airports becoming transhipment hubs-
Untapped Potential

There is a significant untapped potential for air cargo in India. One can get an indication of this from the very fact that the total volume of about 2.5 MMTA cargo handled by all Indian airports is less than that handled by airports such as Memphis, Hong Kong, Shanghai, Incheon, Anchorage, and Paris.

A recent KPMG report has shown that the average weight load factor of air cargo during the last five years was about 62 per cent, reflecting significant unused capacity. In addition, the transhipment cargo, which constitutes as much as 60-70 per cent of total volumes handled by some of leading airports, is almost negligible for Indian airports.

Thus, a significant potential lies for Indian airports to become transhipment hubs.

Hyderabad airport, which is currently handling cargo of about one lakh tonnes per annum (TPA), is favorably placed to take this spot. Lufthansa has already nominated Hyderabad airport as its pharma hub and Cathay Pacific recently added twice-a-week Boeing 747 freighter service. Also, Thai Airways and Blue Dart are offering main-deck through their Boeing 747-400F MD-11F and Boeing 757F freighters.

In addition, about 18 scheduled airlines, including 13 international, have cargo bases at Hyderabad airport, operating close to 2,000 flights a week, thus, offering ample belly space for air cargo. The belly space ranges from two to three tonnes in a 737-type aircraft and 20-25 tonnes in the larger 747-type aircraft.

“We are taking several initiatives to become a hub, taking advantage of our location, infrastructure, and connectivity. Our terminal capacity can be modularly scaled up to 1.5 lakh TPA, while our apron is being upgraded to Code F, capable of accommodating even A380s,” says Kishore, adding that developing a cargo hub at Hyderabad can save both money as well as time for airlines and the trade.

BIAL too aims to develop a D-D transhipment zone on the airside in the medium to long-term. In the longer term, BIAL intends to manage about 15-18 per cent of volumes through transhipment.

Pune airport’s transhipment facility, which became operational in March 2018, allows exporting cargo to Dubai and other international destinations. However, the international cargo quantity at the airport has slumped mainly due to a drop in international connections. Factors like lack of basic infrastructure are also at play. Most exporters are ready to spend extra money and transport goods to Mumbai rather than opt for Pune.

AAICLAS is in the process of creating an exclusive infrastructure for the handling of Transhipment Cargo at Air Cargo Complex, Chennai. Secondly, Vizag Airport has also a huge potential to become a transshipment hub, given its geographically advantageous location. The Domestic Air Cargo Operation at present is being managed by AAICLAS departmentally, and there is an action plan in the offing to establish transshipment cargo infrastructure at the airport. Gazder informs, “There are three International airlines namely – Air Asia, Silk Air and Air India connecting Vizag with Singapore, Dubai and Kuala Lumpur. There is certainly a demand in the pharma and seafood sector, and once the transhipment facility is made operative, the demand for air connectivity will increase too. The geographical advantage of Chennai and Vizag is certainly an opportunity to be capitalised by AAICLAS.”

Expressing that the new transhipment rules are a good step and that it will add to the service bucket of many Indian Logistics Companies, Yashpal Sharma, Managing Director, Skyways Group says, “The policy shift from the Government and at the same time its drive to optimise capacity utilisation through big-ticket privatised airports is heartening. The opportunity is there for all airports in India to explore this and I am confident that most of the private airports will do so. Creating a separate facility to cater to transhipments at each airport will surely boost the confidence of customers and industry stakeholders including us.”

Meanwhile, CK Govil, Owner, Activair Airfreight India stresses that the work of this magnitude requires a lot of planning both in terms of work and people. “While the mandate is absolutely clear on the development, there have to be efforts to work around the complexities of the multiple parties involved in the setup.  It will obviously take some time to feel the work on the ground however, I am reasonably comfortable that the impact will be across all the sectors and not just restricted to Delhi,” says Govil.

Complementing Govil, Vohra says that there are other airports focussing on developing transhipment hubs at their properties. Kolkata, Mumbai, Pune, Hyderabad along with other metro cities are already in the process of becoming transhipment hubs. The upcoming Noida International Airport (NIA) at Jewar will be a transhipment hub for the country once it starts operations in 2022-23. As per the sources, the airport is expected to cater to 2.5 million tons of cargo in the next two decades.

Outlining a practically significant perspective in a real-world sense of importance, Jayaram Krishnan, Partner, Natesa Iyer & Co states, “The transhipment concept focusses only on infrastructural facilitation. Using the country’s airports for International transhipment is dependent of freedom rights being granted by other nations, We need to remember ‘Open Skies’ policy that India has adopted for cargo is not a universal facilitation and the right way is to conceive and implement regional cargo hubs of SAARC region before this can be scaled up. Kolkata and Chennai/Hyderabad can emerge as regional hubs.”

Krishnan continues, “The airports should be considered as free zones and, barring security aspects, the movement of cargo should not be in any way affected by border control processes for an effective transhipment activity. A lot can be learned from the cargo hubs like Dubai, Singapore, Hong Kong, Doha, Frankfurt, and Amsterdam, etc. Processes have to be simple and part of the normal operations.”

Strengthening Initiatives

The Government has taken various initiatives to improve the existing infrastructure at AAI run airports across India. They have also worked out plans to build a few new airports. The UDAAN scheme is turning out to be a big boost for regional connectivity and thus making way for the improvement of airport infrastructure at various regional locations of India. The government has already privatised six more airports in India and they will soon see the world-class infrastructure for passenger and cargo. The private airports are enhancing capacities too. A lot of expansion of terminals and airports will create possibilities for more aircraft which will mean greater cargo capacity too. The cargo side improvements at various private airports are visible and very heartening. General cargo, special cargoes like temperature control, etc. are all getting a big infra push from these airports and will make the Indian supply chain comparable to any in the world and will surely boost EXIM for India.

At Hyderabad airport, the regional frequencies from Hyderabad increased from 212 a week in March 2018 to 347 a week in August 2019. The airport already has a 33,000-tonne capacity dedicated temperature-controlled pharma zone, a 20-acre Free Trade Zone with warehousing and distribution and the integrated terminal operated by GMR and Menzies Aviation of UK.

New initiatives include cool container links for pharma products, general and temperature-controlled warehouses within the cargo village, promotion of road feeder services and 24×7 customs clearance of cargoes. The last initiative is particularly required for a full-fledged cargo hub as both Delhi and Mumbai airports have one-shift of customs operating hours, while airports such as Hong Kong, Dubai, and Shanghai have 24×7 customs clearance.

“What the airport needs now is a domestic carrier to turn it into its cargo hub. And on this count, the airport operator is in talks with a few airlines and hopes to seal a deal soon. The infrastructure, connectivity and ancillary facilities are ready. Once we get a carrier, the airport will soon serve as India’s much-needed air cargo hub,” underlines Kishore.

To establish an Air Cargo hub in India requires a dedicated core group of decision-making officials from the government and the player of cargo Industry, feels Gazder. Besides, it is important that Indian carriers should use wide-body freight aircraft to create air cargo capacity by way of two-way transportation of tourists to the  Indian subcontinent. Gazder says, “In this regard Ministry of Civil Aviation has been extending all kind of encouragement to establish agreements between national and International carriers/freighters and other airline operators to provide access to key global cargo hubs. Regulating policies and streamlining of transhipment procedure to support seamless transhipment of air cargo from Domestic to International flights and vice-versa on a tail-to-tail basis for the quick and cost-effective turnaround is being considered and worked upon. Further, the government has taken several initiatives to cope with the burgeoning traffic of cargo and to bring the country’s logistics on a par with global standards. In this regard, the decision to reduce international air cargo dwell time from 72 hours to about 48 hours is worth mentioning.”

Also complementing the government’s efforts, Vohra expresses that with a region-wise focus, the government is leaving no stone unturned in improving infrastructure in some of India’s key, yet undeveloped regions. Vohra maintains, “It’s not just the government but the private sector also has extended its support in this regard. The government is actively developing multimodal logistics parks in the country. The dedicated freighter service of SpiceXpress between Guwahati and Hong Kong will provide huge opportunities to the Northeast regions and allow them to expand their reach to international markets.”

Huned Gandhi, Managing Director, Dachser India jots down essential developments happened in the industry lately.

1. “Air cargo transport industry has been growing steadily in India over the past decade. The domestic cargo traffic registered a growth of 6.6 per cent (CAGR) over the period from 2007-08 to 2017-18 while International cargo traffic grew at 5.4 per cent (CAGR) during the same period. Indian air freight growth has been fastest in the intra-Asian lanes.
2. In the past, the air-freight sector offered limited services, with significant dependence on several intermediaries and air passenger operations. Now, there are many freighter operators serving the Indian market for a long period without being swayed by temporary headwinds and focused on the long term growth potential of India.
3. Government of India is focused on creating an atmosphere for ‘Ease of Doing Business,’ make it less bureaucratic, having quicker turnaround time for Customs clearance, having state-of-the-art handling facilities and embracing new technologies and various other initiatives; up-gradation of existing airports, development of low-cost airports and increase in investment in the sector to make it a reality.
4. Besides the government initiatives in the Air Cargo industry, on the private front to the shippers, forwarders, carriers and airport handling agents too are embracing technological innovations and moving towards an IT-enabled environment and aiming to drive the growth and the progress.”

Gazder too lists down significant initiatives taken by the AAICLAS in this regard:  

• It is important that Indian carriers should use wide-body freight aircraft to create air cargo capacity by way of two-way transportation of tourists to the Indian subcontinent.

• In this regard, the Ministry of Civil Aviation has been extending all kinds of encouragement to establish agreements between national and International carriers/freighters and other airline operators to provide access to key global cargo hubs.

• Regulating policies and streamlining of transhipment procedure to support seamless transhipment of air cargo from Domestic to International flights and vice-versa on a tail-to-tail basis for quick and cost-effective turnaround.

• Transhipment cargo which constitutes about 60-70 per cent of total volumes handled by some of the leading global airports is quite low in India. The Government has taken several initiatives to cope with the burgeoning traffic of cargo and to bring the country’s logistics on a par with global standards. In this regard, the decision to reduce International Air Cargo dwell time from 72 hours to about 48 hours is worth mentioning.”

Achieving the dream by 2025?

Various developments are going on in varied sectors related to air cargo infrastructure, technology set-up, etc. at a very fast pace to achieve the goal of becoming a transit cargo hub by 2025.

The Air Cargo Policy also marks the government’s aims to do away with paper transactions and implement digital transactions wherever possible which will reduce the holding time of the cargo at air cargo terminals. The usage of new technology like the Internet of Things (IoT) etc. shall be useful in eliminating revenue leakage in the logistics chain.

 “This is a very ambitious target set by the Government and will be dependent on various alignments within and outside the government agencies, port authorities, terminal operators and the Freight Forwarding community,” says Sharma, adding that India will need to make many more changes and ease the processes to facilitate transhipments at airports and ports. The markets of South East Asia plagued with capacity constraints, India can surely add a great value in offering its shores and skies for being the choicest transit hub in the region.

“The government is adopting a systematic and inclusive approach with the due exchange of thoughts with all the stakeholders in general and Domestic and International Airlines/freighter operators through a digital platform to ensure transparency. The government is also planning to associate with the international trading partners to develop the Trade-Corridor for speedy movement of high-value air cargo. In order to promote India as a transit hub, the establishment of Special Economic Zones (SEZs) in the vicinity of the major international airports is being planned and the availability of land is being explored,” enlightens Gazder.

The future of the industry is good provided all the steps mentioned in the National Air Cargo Policy are taken care of properly, feels Vohra. “India has the potential to play a much larger role in the air cargo market, especially with international carriers looking at Asia as a major growth driver for its air cargo business. With the right policy in hand, we are in the process of removing obstructions like the absence of a full-fledged air cargo hub, regional air connectivity and good road infrastructure. Personally I feel that to make this a success, airlines should bring in their freighters in India to make enough capacity available otherwise transhipment from other countries won’t be cost-effective and will leave a negative impact,” suggests Vohra.

The most crucial aspect, Krishnan says unless and otherwise there is a homegrown freighter operator with an international footprint the reality will always elude us. SpiceJet’s SpiceXpress rolling out operations to Kabul, Dubai, Hongkong should be an encouragement to others.

According to Menen, “Given the existing mindset and the way things have been happening, purging the existing mentality and the number of agencies involved in the trade, transportation and logistics industry, I will say it is an ambitious target. There are too many agencies involved in the process today. These agencies have to step back and create one entity that is fully empowered, tasked to make it happen. This entity will have to be fully funded and insulated from any and all political influences.”

India has a geographical advantage to operate as a successful hub initially serving the emerging markets of the South Asian Association for Regional Cooperation (SAARC) and countries such as Myanmar, Vietnam and Cambodia. This cautious start will provide the requisite knowledge and expertise to take on the other existing major Middle Eastern/Asian hubs and expand its hinterland up to Japan in the east and Africa in the west. Besides, India offers a stable political environment, skilled workforce. The existing airport infrastructure and user charge which is likely to act as a major disincentive to attract customers to use the hub is being aligned and worked upon as part of the ongoing reformation evolution.