Hovering at 8 percent to 9 percent annual GDP growth, India’s economic success belies the extreme poverty experienced throughout the country. It’s this poverty, however, that has also led to its success as a manufacturing hub.
India’s low labor costs and consistently high levels of output have convinced numerous companies to set up shop in the region, attracted by the promise of strong returns on investment. Such industrial growth in a poverty-stricken nation raises multiple logistical questions.
For instance, is India’s aviation sector equipped to handle the influx of goods being exported? Does it have systems in place to ensure that this growth trend continues? Not so, many experts contend.
If there’s a general consensus among air cargo experts, it’s the weakness of India’s aviation infrastructure. Citing air-traffic congestion and a lack of technological systems, many aviation insiders have expressed concern about the nation’s flight operations.
Bernard Asare, director of air traffic management strategy and business development at the U.S.-based ITT Corp., is one of them. To him, it’s simply a matter of infrastructure investments failing to keep pace with demand. “Air traffic congestion in India and globally is the result of outdated technologies and operational procedures not keeping up with rapidly changing aviation industry dynamics,” Asare says.
And then there’s the political red tape and nontransparent dealing seen throughout India.
The problem is multifaceted, Asare asserts. Air traffic continues to grow amid archaic air traffic management systems, and this only leads to more obstruction in India’s airspace and airports.
Still, Asare says air navigation service providers globally — including in the U.S., EU nations, Brazil and China — are facing air traffic growth similar to India’s. Major investments in infrastructure are needed to ensure those systems can cope with that growth. “Unfortunately, Airports Authority of India doesn’t have the capacity to handle the massive growth and influx of traffic [into the region].”
It’s why shipment delays are so common, according to John Cheetham, regional commercial manager for Asia-Pacific at British Airways World Cargo. A casualty of India’s weak infrastructure and crowded airspace, cargo deliveries are often postponed, he explains.
“Customs practices are also a constraint on airfreight as closures, public holidays and strikes often impact the movement of cargo,” Cheetham says. Either way, he maintains, the biggest detriment to India’s airfreight operations is its infrastructure.
Madhav Thapar, senior vice president of airfreight for Africa and South Asia-Pacific at DHL Global Forwarding, couldn’t agree more. Pointing to a “geographical imbalance” in capacity development, Thapar says some Indian airports with high volumes of airfreight are encumbered by their lack of modern processes.
Fortunately, he says, DHL has taken numerous measures to overcome this hurdle. In recent years, the global freight forwarder has procured a bonded warehouse in Bengaluru, launched a free-trade zone in Tamil Nadu, and opened industry-centric compliance centers in various parts of India, Thapar says. Establishing a presence throughout the nation has enabled DHL to maintain better control of its inventory, he explains.
What’s more, Thapar says, “DHL works constantly with the Indian authorities, both directly and through industry associations and forums, to constructively develop solutions [to infrastructure constraints].” Considering the volume of goods being imported and exported out of the region, this is even more necessary, he explains. In fact, DHL counts India as its largest airfreight market in Asia.
Another company with a large presence in India is Lufthansa. Operating a pharmaceutical hub at Hyderabad International Airport since May, Lufthansa Cargo launched this facility to meet the cool-chain requirements of transporting such time-sensitive materials. Before doing so, however, Lufthansa ensured that the infrastructure supporting the facility could hold up to its stringent internal certification processes.
It’s a key reason why Carsten Hernig, Lufthansa’s regional director, South Asia, Middle East and Pakistan, thinks assertions about India’s weak infrastructure are overblown.
“Immense activities are underway or have already been accomplished to improve India’s situation,” Hernig says. “New airports have been built in many cities, and improvement is going on at practically every international airport in the country. The development of infrastructure is on the way and will not be stopped.”
Hyderabad airport, for instance, is only three years old and features a state-of-the-art cargo terminal spanning 14,330 square meters. And Delhi’s Indira Gandhi International Airport received a facelift in recent years, welcoming a new, 500,000-square-meter international terminal in 2010.
To Hernig, it’s more beneficial to look at the progress being made in the poverty-stricken nation than to discuss its shortcomings. “More important at this stage is that the processes are now being developed in a direction, which enables transportation flows to make maximum efficient use of the new infrastructures,” he says.
Despite improvements to India’s aviation sector, numerous challenges remain — namely its reluctance to embrace E-freight, some experts say.
Thapar, for one, believes the nation’s airfreight operations could improve tremendously with the implementation of E-freight. Not only would this streamline processes and improve cost-efficiencies, he says, it would also eliminate waste “due to high paper consumption involved in current manual transactional modes.”
Even Hernig can’t argue with this point. “India still has a way to go when it comes to efficiency improvements,” he says. Transshipments, known-shipper concepts, electronic billing and cargo accounts settlement systems implementation are some of the areas Herning mentions as necessitating progress.
Not surprisingly, ITT’s Corp.’s Asare believes one key action could boost India’s airfreight operations tremendously: investing in modern technology.
“As economic activity in India increases, more and more goods must be moved in and out of the country’s airports and airspace as efficiently as possible; however, technologies, such as secondary radars, are no longer adequate in supporting these increasing number of air traffic operations,” he says. “This hampers the efficient air transportation of goods in and out of India.”
Asare encourages India to follow the U.S. Federal Aviation Administration’s lead and employ advanced air traffic control techniques, such as automatic dependent surveillance-broadcast, or ADS-B. A satellite-based system like ADS-B would boost India’s freight operations by enabling airports and airlines to transport cargo more efficiently, he says.
Clearly, there are high costs associated with this technology, but Asare believes such investments are necessary to catapult India’s aviation sector into the 21st century. Doing so would also narrow the gap between India’s high level of output and low level of standardization.
After all, many experts say, India’s economy shows no signs of slowing down. And although the nation is facing inflation pressures, which are elevating labor costs, India will most likely be able to compensate for this expense, British Airways’ Cheetham maintains. For one thing, he says, it will affect the manufacturing of low-end merchandise, which will validate attempts to diversify production.
Thapar also projects continued economic growth, especially in India’s southern region, which is known for its booming technology sector. Crediting the South Asian nation with becoming a supplier to emerging markets, he says India’s mid- to long-term prospects for airfreight growth are strong.
In fact, Thapar says, “In the near future as the Indian economy hopefully contains inflation and moves to a real growth of 9-percent-plus, consistent double-digit air cargo growth looks to be a realistic expectation.”
Whether this expectation becomes a reality or not, one fact remains: India’s airfreight operations continue to be a contradiction of progress and resistance to change.