Indian air cargo industry to grow at 5.5%, says study

The Dollar Business Bureau The total market opportunity in the Indian air cargo sector is expected touch 2.8 million tonnes by 2018, increasing at a compounded annual growth rate of 5.5%, a study said. In 2014, the market size was 2.26 million tonnes. Experts said that the industry will maintain the growth path for at least the next five years. According to analysts, one of the major reasons behind the growth of the air cargo industry has been the relaxation of the FDI (foreign direct investment) limit by the government. The present government is willing to attract foreign investment and that has proved to be a major boost for the industry. “Allowing 100% FDI in existing airports and under automatic routes along with 100% tax exemption for airport projects for the next ten years have been major growth drivers,” said the study carried out by market research agency Netscribes. With increasing trade activities in the Asia-Pacific region, the Indian air cargo industry has the second fastest growth rate in the world, ranking just behind the Middle East. Recently, the government has also identified 24 airports across the country for the development of cargo terminals. “Airports located in tier-2 and tier-3 cities have been identified where common user domestic cargo terminal (CUDCT) will be established after checking feasibility,” Mahesh Sharma, Minister of State, Civil Aviation, had said. The facilities will be developed after carrying out feasibility study and minor modifications in the old/redundant passenger terminal buildings, he said. The Airports Authority of India (AAI) has decided to utilise redundant passenger buildings with minor modifications such as civil or electrical works or by creating a new facility for international cargo operations. The AAI has already established common user domestic air cargo terminals at Coimbatore, Jaipur and Lucknow airports. The international air cargo traffic is expected to grow at an average rate of 4.7% per year over the next two decades. A study said that increased trade activity, especially of physical goods with the Asia-Pacific region and the relocation of trade epicenters to China, Southeast Asia and Africa will open new opportunities for the air cargo market in India. “The market is set to expand predominantly owing to the growth in retail sector, pharmaceutical shipments, growth in e-commerce and poor infrastructure of the port sector,” the study said. Apart from India, the industry is witnessing growth in China and the entire Asia. “Asia overall and domestic China will continue to lead the world in average annual air cargo growth with domestic China and intra-Asia markets expanding at 6.7% and 6.5% per year respectively,” said Mouparna Das, analyst at Netscribes. The report also highlighted the challenges faced by the Indian air cargo market due to the lack of dedicated air cargo warehousing facilities at major airports and restrictions on sanctioning of licenses for operating bonded warehouses. Most warehousing facilities cater to international cargo and this has hindered operations of domestic cargo. “If the air cargo market in India is to reach its full potential, it needs to find answers to these problems fast,” the study suggested.  

May 9, 2015 | 4:16 pm IST.