India's shifting aviation landscape
India has quickly become a thriving player in the worldwide air cargo game, and with a few adjustments, the country is on track to shine even brighter in the near future.
The Airports Authority of India announced late last year that it will release a 10-year aviation policy this summer to address private-sector investments and air cargo developments. The sea change toward private investments, however, is already underway.
For the past few years, the government has been transitioning India’s airports from public institutions to private-sector life, and this has allowed companies to implement massive upgrades to airports in Mumbai, Chennai and elsewhere.
With the organization projecting a 10-percent annual Indian aviation growth for the next five years — and with cargo expected to rise 0.8 million tonnes by 2017 — demand is not an issue. But seemingly massive challenges remain. Infrastructure growth has been slow, historically, and the country’s largest airlines, Air India and Kingfisher, are saddled with their own issues.
The authority’s current draft strategic plan takes a long look at cargo and outlines how Indian cargo can adapt to the changing world. According to Anil Khanna, managing director of Blue Dart Express, the policy details the creation of a cargo-terminal infrastructure in the country’s airports, which will include separate areas for non-courier express shipments; the development of cargo villages; the establishment of free-trade zones at airports; guidelines for cargo automation and governance; and the creation of top-notch maintenance and repair facilities.
Addressing these issues will go a long way toward upgrading India’s aviation outlook, Khanna says. A lack of air and surface infrastructure are the biggest problems he sees right now, with clogged airports adversely impacting his express business. As his tonnage increases, the size of the airport stays the same. Fuel prices, of course, are a perennial issue.
On top of all this, carriers in India tend to pay higher prices than their colleagues in other countries. When analyzing the fees airports charge carriers for cargo movements, he says South Korea dropped its fees by 20 percent in the last two years. In that same period, India rose its fees by a factor of eight.
“Transport infrastructure and lack of understanding of supply chains are major obstacles to growth in India’s express market. We are glad, however, that government has taken up the issue of infrastructural challenges seriously,” he says. “The government of India has planned for phase-wise airport development and creating world-class airport infrastructure in some major places. This is likely to boost airline and cargo sectors. Many airlines are planning to create full-fledged cargo operations.”
The new aviation strategy, Khanna says, should go beyond surface problems to address a host of other issues. Indian aviation is a bit behind in safety and security, and he says the government should constantly look to other nations in order to mirror industry standards. He also calls for giving fuel a declared goods status that would impose a uniform VAT of 4 percent for the entire country. Finally, he wants the government to bring back parts of the country’s income tax act, which made it easier for foreign companies to lease aircraft to Indian firms.
“The Income Tax Act provided for income tax exemption to foreign companies on lease rentals paid by an Indian company. This exemption was withdrawn in 2007, which has, as a result, increased the cost of air operations,” he says.