Sluggish Europe, US hit air cargo exports from India

New Delhi: Demand for air cargo exports from India has declined following the pandemic, primarily due to economic contractions in the US and Europe. Consequently, there has been a rise in available capacity and subsequent fall in transportation rates, a senior industry executive said.

“During covid, there was less capacity or few freighters so, the air freight rate to the US went up to ₹700-800 per kg, which was very high...now, it is down to ₹200 a kg. In fact, the rates are even less than pre-covid levels and the main reason is less demand because of a recession in the US and Europe,” Vipin Vohra, chair, Civil Aviation Committee, PHD Chamber of Commerce and Industry, said in an interview.

In addition, while pharmaceuticals, automotive components, handicrafts, and textiles were among the high-volume commodities exported via air earlier, waning of the pandemic and recessionary conditions in these regions caused a decline in volumes of these products, he said.

“...items which are witnessing an increase are diamonds, jewellery, among other things, but the weight is not much. The only thing which is picking up is e-commerce where goods are exported from Tier-2, 3 cities, where packages are small, just 20-50 kg, but the big commercial shipments are down,” Vohra added.

Data from Airports Authority of India showed international air freight during the financial year ended March fell 5% to 1.9 million MT. So far in FY24, international freight was at 317,589 MT, 1.2% lower than a year ago.

Since October 2022, the air freight industry came under 18% goods and services tax rate after enjoying an exemption till September. While the civil aviation ministry is considering approaching the finance ministry to reconsider the taxation rate for air freight, it is yet to take a final decision.

“GST on sea freight is 5%, on air freight it is 18%. It is making Indian goods very expensive in the world market. While GST is refunded to the exporter, money gets blocked for 2-4 months and impacts trade,” he added.

High demand for air freight during the pandemic attracted passenger airlines like SpiceJet to expand its logistics arm SpiceXpress while IndiGo announced an additional four freighters to its fleet.

However, the weak demand has impacted airlines’ cargo plans for the near term. While SpiceJet has cut its cargo fleet to three from 16-18 freighters during covid, IndiGo hasn’t announced any expansion in cargo capacity. Pradhan Air, which was expected to add its second aircraft in December 2022, still maintains only one freighter.

“Unfortuantely, when all these airlines thought of having freighters, transportation rates were quite high due to covid...now the rates are so low and there is more capacity available...It is very difficult to run and cover the cost...you have to have full routes from where you can get cargo on both ways on regular basis,” Vohra said.

While India has the potential to become an epicentre for air cargo on the back of Make-in-India programmes, and local production by giants such as Foxconn, Samsung and others, Vohra said that there are challenges that need immediate redressal.

“In Hong Kong 94% of cargo comes ready for carriage from agents’ warehouse in pallets and airports are just transit points. In India, airport operators say everything has to go through them. There was a policy on air freight stations which was announced in 2014 and it has not been implemented so far. There is often doubling of costs while paying for clearance of cargo if multiple domestic airports are involved,” he said.

The air cargo industry also witnesses challenges due to lack of digitisation in the custom and security clearance processes and uncoordinated approach in implementing amendments to custom clearance rules and procedures often leads to delay and inefficiency.

“We are positive that air cargo is going to increase. But, our airports should be sufficient to handle the cargo that is expected later,” Vohra said.