When GVK unveiled its new ‘export heavy and bonded cargo’ terminal at Air Cargo Complex at Mumbai Airport in December 2016, it captured the attention of India’s foreign trade community. Why? The development aims to turn Mumbai Airport into the biggest cargo airport in the country. The Dollar Business paid a visit to the airport to check how the Air Cargo Complex has fared since then.
Niladri S. Nath | March 2017 Issue | The Dollar Business
Sahar Road, the road leading to the Air Cargo Complex (ACC) of Mumbai International Airport Pvt. Ltd. (MIAL) at Mumbai airport, was narrow and congested. But, it was expected. All the inland container depots and airport cargo terminals The Dollar Business has visited, over the years, suffer from one common problem – congestion – a challenge that is hard to do away with. And as if congestion alone isn’t enough, Sahar Road has an additional problem of its own. It faces encroachments in the form of slums, make-shift shops and unauthorised parking areas for auto rickshaws, which make movement of traffic to and from ACC even more difficult.
It was a Monday morning and, as far as cargo movement was concerned, the queues were long. A stream of exports cargo, majorly odd dimension cargo (ODC), managed by various freight forwarders, were crowding the lane that leads to the entrance of ACC. And that is the crux of the problem at Mumbai Airport's cargo complex.
A hassle-free access to ACC is what the exim community demands. “Long queues outside the complex are a challenge for us. I think, the authorities should build more entry points and widen the road,” points out Pramod Sant, Vice President, Head of Import Export and Export Control and Customs, Siemens India Ltd. But there is a glimmer of hope that encroachments in the surrounding areas will soon become a matter of the past. For, the Government of Maharashtra and various agencies are working on the problem – says Loknath Rai, Chairman, Western Region, the Air Cargo Agents' Association of India.
ORGANISED CHAOS
The road that serves ACC is divided into five lanes – three dedicated to exports cargo and two to imports. However, the vehicle holding zone inside the complex has six lanes and priority is always given to perishable commodities. In addition, there are two parking areas outside the complex, which are used as vehicle holding zones during peak hours.
Once inside the complex, a GVK official gave us a brief introduction into its history and key facilities. It was in 2006 that Hyderabad-based GVK took charge of the airport and cargo operations from Airports Authority of India (AAI). Currently, while GVK holds a 74% stake in ACC, Air India (which represents AAI) holds 26%. Interestingly, over the years, GVK's share in total cargo volume handled at ACC has been rising fast due to its service efficiency and the number of airline clients that it handles today is 32, whereas AAI still manages just 8 airlines.
For the uninitiated, GVK manages three facilities at ACC – a new export heavy and bonded cargo terminal, an import cold zone, and an export terminal for perishable goods. Alongside, Air India also runs an export terminal for perishable agro commodities. Interestingly, a GVK official revealed that difference in opinions between Air India and GVK frequently crop up, which can make things challenging at times. Despite this, ACC, which has a rated capacity to handle approximately 700 metric tonne (MT) of cargo a day, claims to hold the record of handling 1,030 MT of cargo in a day!
"Pharma & Agro commodities constitute 60% of exports from the terminal"
Growing NEEDS
Almost 60% of the export cargo at ACC is pharmaceutical and perishable agro commodities. We were informed that the GVK-owned export perishable terminal was built under a build-operate-transfer (BOT) model with Cargo Service Centre (CSC) India, a leading ground handling services company. This terminal was originally 1,800 sq.mt., which has now been expanded to 2,100 sq.mt. in order to cater to the growing agro and pharmaceutical exports at ACC. It is temperature-controlled (15-25 degree Celsius) and equipped with four truck docks, two weighing platforms, a customs examination area, a screening area and a palletisation area.
It also houses special chambers that run between 2-8 degree Celsius and are dedicated for extra-sensitive pharmaceutical cargoes. As of now, the one time holding capacity at the export perishable terminal is 167 MT. But, authorities confirmed that they are in the process of constructing a mezzanine to handle an additional 100 MT of cargo. Also, as per the Cargo Master Plan (CMP), GVK is constructing a new terminal exclusively for handling agro commodities. When complete, the existing terminal will handle only pharma products.
LEARNING TO COPE...
The complex also houses a general cargo exports section which is shared by GVK and Air India. Since GVK handles 85% of the exports cargo volume, the space often becomes a bone of contention. One disadvantage for GVK, however, is that the screening and the palletisation areas are not located adjacent to each other, which can at times hamper smooth cargo movement. At present, the screened cargoes are carted to a built-up palletisation area. Also, deputing key account managers, who coordinate with the ground-handling agencies and supervise various sections to ensure smooth movement of the cargo, has been a challenge.
While walking towards the palletisation area, we passed the foreign airline cargo terminal and Air India cargo handling zone, comprising of elevated transfer vehicles (ETV) and unit load devices (ULD). On one hand, Air India's side of the palletisation zone wore a desolate look with almost negligible cargo movement. On the other hand, GVK's side - which is capable of handling 40 ULDs at a time (since GVK has five cargo freighter bases) - was teeming with activity. Although GVK’s screening and palletisation areas aren’t connected, one big advantage it has is that the palletisation area connects directly to the freighters, which helps reduce dwell times
The import cold zone at ACC has a holding capacity of 860 MT.
Within the same space, GVK boasts of a newly-constructed export heavy and bonded cargo terminal – located right beside the main entrance of the cargo complex. With seven X-ray machines, two weighbridges and a separate channel for ODC, the new terminal offers reduced dwell time to exporters. Interestingly, GVK has set the dwell time target of four hours with an aim to make ACC an attractive place for exporters.
...And CATCHING UP
Our next stop was the import zone. It currently handles approximately 14,000 MT of cargo per day. Recently, GVK has built a multi-level racking system with a capacity of another 1,000 MT – this is a makeshift warehouse, as the originally allocated space for imports zone cannot accommodate the fast-increasing volume of cargo. The import zone encompasses 40,000 sq.mt., and is equipped with 40 battery-driven and 50 diesel-driven fork-lifts.
The current one-time holding capacity is 4,500 MT. However, the average one-time holding at the GVK import zone is only 2,000 MT because of its operational efficiency. “Over the last few years, GVK improved its performance and focused on cargo. Handling of cargo is now fast and there have been no cases of pilferage or damage. Siemens imports approximately 6,600 MT of cargo consisting of 1,20,000 packages per year. And, the instances of the damaged packages are rare – just three cases in the last year,” says Sant.
Within the import zone, GVK also houses a cold zone with a one-time holding capacity of 860 MT of cargo. The zone can accommodate around 1,148 skids. It is divided into sections to lodge various cargos, such as dangerous goods, raw materials for pharmaceutical manufacturers, etc., and offers facilities in terms of plug-in points to operate unicoolers and envirotainers.
The newly-inaugurated export heavy & bonded cargo terminal at ACC.
GVK, as part of its process optimisation initiative, is also working towards improving G-MAX, its cargo community portal. Rai mentions, “The portal has made manual processes like delivery orders redundant by making the system EDI-enabled. So, human intervention has become minimal and such initiatives have made the process transparent, faster and efficient.” It is expected that soon G-MAX will be able to connect with freight forwarders to offer complete transparency to their customers with comprehensive cargo movement details inside the airport.
Speed Breakers
GVK, despite its attempts to offer a smoother operation to its clients, faces some challenges that are common among most Indian airports like congestion and infrastructural inadequacies. To add to that, GVK is considerably challenged by the growing aviation sector in areas such as Goa and Gujarat. While a new green field airport is being developed in Goa by GMR Group, Ahmedabad airport is getting upgraded. This may hamper the air cargo flow through Mumbai Airport.
Further, according to officials, the movement of cargo at ACC starts only in the evening even though it offers 24/7 services to its clients. This creates undue congestion at the terminal in the evenings. Multiple taxes is another problem for traders. “The regions within the city limits of Mumbai do not generate any cargo. All our cargoes come from other parts of the country. The government needs to be considerate of the situation and abolish octroi to support the airport. Nonetheless, trade community is happy that GST, once implemented, will bring this much-needed change,” says Rai.
Firdos Fanibanda, Owner of Modern Cargo, feels a lot still needs to be done when it comes to the functioning of the cargo complex at Mumbai Airport. “Space constraints at the Air Cargo Complex lead to delays and mishandling. Also, foolproof theft and pilferage control measures need to be implemented. The frequent breakdown of the EDI system also results in long delays. Having said that, by and large, the Mumbai Customs is trade-friendly and has been really proactive in introducing initiatives to facilitate foreign trade from the airport,” says Fanibanda.
Another challenge that airport users face is the uncompetitive cargo tariff structure. “The tariff seems to be on the higher side considering the facilities the complex offers. We have urged the authority to upgrade the infrastructure to justify the charges” adds Rai. Last but not the least, the government has leased 2,100 acre to ACC, but thanks to encroachment that only 1,400 acre is being actually utilised by the airport. The authorities need to urgently address the issue as this is hampering the productivity of the cargo complex.
PROMISING NUMBERS
Mumbai Airport handled 2,47,181.54 MT and 2,64,902.35 MT of cargo in FY2015 and FY2016, respectively. And, in FY2017 (till November), it has handled 1,89,434.51 MT of cargo. While FOB value of exports cargo handled in FY2015 and FY2016 were Rs.42,564.08 crore and Rs.44,994.96 crore, respectively, FOB value of exports cargo handled in FY2017 (till November 30, 2016) stands at Rs.30,287.12 crore.
Even when it comes to the value of import cargo, Mumbai Airport has seen a remarkable growth over the last few years. And the growing revenues of Customs Department from Mumbai Customs Zone III is a testimony to the fact. Custom's revenue from the Airport has grown from Rs.8,973.48 crore in FY2012 to Rs.11,606.81 crore for FY2016.
In fact, taking into account the rapid growth in revenues from the airport, the Central Board of Excise and Customs (CBEC) has set a revenue target of Rs.14,500 crore for Mumbai Airport for FY2017. Interestingly, this translates into 6.30% of the total all-India target of Customs Duty set for the current fiscal. However, till January 2017, Mumbai Airport had generated only Rs.10,476.19 crore in import duties. The question now is: Can the airport generate the remaining revenue of Rs.4.024 crore in two months' time? A tad difficult, we think!
Taking off
The Air Cargo Complex at Mumbai Airport has good future prospects. Not only are the authorities investing a lot on improving the infrastructure further, but are coming up with innovative solutions to attract trade. A growing list of clients, including credible names like RIL, Siemens, Apple, HP, etc., says it all. It shouldn't be long before this complex becomes a modern, model air cargo facility in India. (Or so we hope.)
Dushyant Mulani, Treasurer, Brihanmumbai Custom House Agents’ Association (BCHAA)
TDB: What is your opinion of the infrastructure and facilities available at Air Cargo Complex in Mumbai?
Dushyant Mulani (DM): Air Cargo Complex at Mumbai International Airport is a premier air cargo complex in the country. It handles almost 40% of the country’s air cargo traffic. When GVK took over the airport, the infrastructure was not up to the mark. It wasn’t supporting the increasing cargo volume, which resulted in the cargo moving away to other airports. GVK is now completely focussed on providing better infrastructure. The authorities have set up cold zones, a new export heavy bonded warehouse, etc. Now, what needs to be done is to focus on the imports side, as far as capacity augmentation is concerned. Mumbai is the commercial capital of the country. If GVK is able to provide
adequate infrastructure, we can foresee a huge growth of cargo.
TDB: How do you view the role of Customs in ACC's growth story?
DM: Customs has taken a very progressive step, especially with initiatives such as Risk Management Service (RMS), self-assessment, single window, etc. Now, on a daily basis, 75-80% of the cargo gets cleared without examination and assessment. With single window clearance, they have brought together all the regulatory agencies such as drug control, food safety, textile, animal quarantine, etc., which has helped reduce the dwell time. The Customs now focuses on dispute resolution on the spot.
TDB: What are your suggestions for Customs and MIAL?
DM: The Electronic Data Interchange (EDI) system needs to be more robust to reduce the downtime – the current version is 1.5, which was installed in 2010. All the trade communities have been requesting for an upgrade. But, the CBEC has taken note of the issue and is investing in infrastructure development. Well, if India needs to compete with its neighbouring countries, like Bangladesh and Sri Lanka, leaving aside China, we need a robust infrastructure. In my opinion, MIAL needs to plan for the next two decades and not just 2-5 years. I am certain that the air cargo volume will increase, especially in the pharmaceutical products category.
TDB: What is the scope for growth?
DM: There is tremendous scope for overall growth, but to achieve growth in cargo volume there has to be a strong integration amongst smaller domestic airports, ICDs and gateway airports like Mumbai. If Air Cargo Complex at Mumbai airport implements the model properly, there will be substantial growth in cargo volume from industrial clusters such as Aurangabad, Nashik, etc. Also, if ACC improves its cargo throughput and the dwell time, it will also be able to attract cargo from places like Goa, Udaipur and Indore.
TDB: What’s your take on the Cargo Master Plan?
DM: We have conveyed our suggestions regarding the Plan. However, it has been delayed because MIAL was entangled in issues with Air India and encroachers. Now, they have to implement their [expansion] plan. And, if they don’t have space here, they should set up an acceptance facility in a nearby area such as Panvel.
Manoj Singh, Senior Vice President and Head – Cargo, GVK MIAL
TDB: What challenges does Air Cargo Complex at Mumbai face and how do you plan to address them?
Manoj Singh (MS): The opportunities to enhance capacity and infrastructure are limited as it is a brown-field airport and the layout of the air cargo terminal is complex. Despite these hurdles, since inception, GVK has commissioned nearly eight major cargo projects and handled a significant portion of international air cargo moving in and out of the country. Also, GVK has successfully raised the cargo throughput capacity by 50% despite limited availability of land resources. In our Cargo Master Plan (CMP), we have adopted a phased approach to introduce key developments. Additional land has been acquired to set up new facilities, remodel existing infrastructure and upgrade the multi-lane access to the cargo terminal. In 2009, we revamped our IT infrastructure to become the first airport in the country to introduce a cargo management system.
TDB: What initiatives has GVK taken to improve the efficiency of air cargo complex at MIAL?
MS: It’s a fact that the handling of cargo is not prioritised the way it should be in the aviation industry. Hence, the key criterion – speed – for which importers and exporters opt for the air route, runs the risk of getting diluted. To improve our efficiency, we have introduced a web-based Air Cargo Community Platform to communicate with all air cargo stakeholders – regulators, exporters and importers, eliminating paper transactions.
We have focused on ensuring zero pendency on import cargo delivery, for the gate-passes generated in a day. We have also introduced a new process management in our recently commissioned Export Heavy and Bonded Cargo Terminal. With the introduction of 24/7 operations, global standards and digitisation of both regulatory and security processes, we are confident of maintaining reduced cargo dwell time of 50%. Moreover, commissioning of Cargo Master Plan has helped the airport attract additional air cargo volume while simultaneously serving clients efficiently. We are also planning to set up a dedicated export terminal for pharma handling with enhanced capacity as well as a new export terminal for perishables.
TDB: Is there any other initiative you have taken up keeping the interest of exim community in mind?
MS: To ensure smooth operations on the ground, MIAL has deployed a battery of key account managers. Each manager handles a set of importers, exporters and airlines to ensure smooth cargo processing. Along with a team working on a 24/7 basis to process cargo, we have a dedicated customer service cell. We also give incentives to our stakeholders such as discounts on cargo handling during morning hours.
TDB: How do you look at the future?
MS: The future looks promising. We are expanding our services and infrastructure bandwidth and are heading towards a 7-8% y-o-y growth in air freight this year.
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