By Staff Correspondent
A slump in demand for air cargo exports from India has been seen in the aftermath of the COVID-19 pandemic, largely as a result of economic downturns in the US and Europe, leading to a surge in available capacity and subsequent drop in transportation rates, according to a leading industry executive.
The diminished demand has led to transport rates falling significantly, from a peak of INR 700-800 per kg during the pandemic to INR 200 a kg at present, even below pre-pandemic levels, according to Vipin Vohra, Chair of the Civil Aviation Committee, PHD Chamber of Commerce and Industry. He attributes this decline to recessionary conditions in key Western markets.
The commodities that previously drove high-volume exports, such as pharmaceuticals, automotive components, handicrafts, and textiles, have seen a fall in demand, as the effects of the pandemic recede and economic conditions in destination regions continue to stagnate.
On the other hand, the shipments of lower-weight items, such as diamonds and jewellery, have increased, while e-commerce exports from India’s smaller cities are witnessing a surge. However, large commercial consignments are experiencing a decline, Vohra added.
The latest figures from the Airports Authority of India highlight a decrease in international air freight, with a 5% drop to 1.9 million metric tons for the financial year ending in March. In the current fiscal year, international freight volumes were 1.2% lower than the previous year.
The implementation of an 18% goods and services tax (GST) rate on the air freight industry from October 2022, after an exemption period, has further complicated matters. Although the civil aviation ministry is contemplating petitioning the finance ministry to reassess the tax rate, a decision is yet to be finalised.
High freight charges during the pandemic led airlines such as SpiceJet and IndiGo to bolster their logistics capacities. However, these plans have been impacted by the recent weak demand. For instance, SpiceJet has downsized its cargo fleet from 16-18 freighters during the pandemic to just three, while IndiGo has not announced any further expansion of its cargo capacity.
Despite the challenges, Vohra remains optimistic about India’s potential to become a hub for air cargo, buoyed by domestic manufacturing initiatives like the Make-in-India programme and local production by major global companies. However, he asserts that several obstacles need to be overcome, including airport operators’ control over cargo handling, the lack of implementation of a policy on air freight stations announced in 2014, and the cost implications of cargo clearance at multiple domestic airports.
Furthermore, the air cargo industry grapples with challenges due to a lack of digitisation in custom and security clearance processes, leading to inefficiencies and delays. “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.
