Given the expected growth in air cargo volumes in the country, the cargo handling capacity at airports would need to be upgraded by around 2.0 million tonne over the next five years.
The air cargo infrastructure in India is increasingly getting constrained by the strong growth in traffic for last few years, mentions an ICRA note. Cargo traffic in India crossed 2.98 million tonnes in FY2017, registering 10 percent Y-o-Y increase and reached 2.5 million tonnes over 9M FY2018 (15 percent Y-o-Y). Indian airports are estimated to have a combined capacity to handle 4.63 million tonnes of cargo per annum as of now – translating into utilisation of around 75 per cent.
The movement in cargo traffic is largely linked with the level of economic activity in the country. With the expected growth in GDP, along with other growth drivers, the air cargo traffic is expected to get a major boost. ICRA expects the air cargo traffic in India to grow by around 60 per cent to 4.7 million tonnes in next five years – translating into CAGR of 9.7 per cent.
Harsh Jagnani, vice president and sector head – Corporate Ratings, ICRA, says “Growing e-commerce, improving air connectivity across small airports in the country, and growth in GDP are expected to result in growth in air cargo traffic. Domestically, plans are afoot to make metro airports cargo hubs catering to the neighbouring regions. Internationally too, India has significant potential to be a transhipment hub for international cargo movement from other countries, given its geographic location and the increasing international air connectivity. However, infrastructure bottlenecks remain a major constraint to the growth prospects of air cargo and the same need to be addressed.”
Despite the healthy growth, the quantum of air cargo handled at all airports in India is significantly lower than the cargo handled at the world’s busiest airport – Hong Kong. In CY 2017 all airports in India together handled 3.3 million tonnes of air cargo, whereas Hong Kong Airport is expected to have handled 4.9 mn tonnes. The infrastructure constraints faced by the sector include lack of sufficient cargo handling infrastructure at tier 2 and 3 cities, congestion at major cargo terminals in the metros, and lack of dedicated facilities for cargo operators result in delays and increased transaction costs.
Recognising the need, the Government of India (GoI) has laid emphasis on cargo infrastructure development in National Civil Aviation Policy (NCAP) 2016 and has set up an Air Cargo Logistics Promotion Board (ACLPB – an inter-ministerial group). Airports Authority of India (AAI) is also expected to play a major role in the development of cargo infrastructure. For better functioning and speedy execution, AAI has setup a wholly owned subsidiary – AAI Cargo Logistics and Allied Services Company in August 2016, which is exploring establishment of dedicated cargo airports in the country.
Jagnani states, “India needs multi-fold approach to development of cargo infrastructure which looks as upgrading existing cargo terminals with advanced technologies, development of new cargo terminals at airports, dedicated cargo airports, and air freight stations. High dwell time (time from cargo arrival to custom clearance) leads to significant transaction costs and operating expense for the air cargo operators. One way to achieve lower dwell time to match with international standards is air freight stations (AFS), which can help to decongest airports and offer value additions to cargo stakeholders.”