ith its growing export trade, a rapidly expanding domestic economy and an aviation regime that provides open access to freighters, India should be poised to take a major role in the global air cargo industry. Most shipping experts believe the country could take a huge leap forward over the next five years or be restricted to just a few faltering steps, missing out on much of its potential future growth.

The key has nothing to do with the miles of technology companies in Mumbai nor the textile businesses in Delhi. For shippers and carriers, the future of the country's role in air transport depends entirely on the country's success in pushing through extensive infrastructure improvements.

Certain East Asia gateways, such as Delhi, have been hit by a downturn in outbound air cargo volume, resulting in substantial excess cargo capacity on key routes to Europe and North America and putting severe pressure on rates.

The excess capacity situation looks unlikely to go away any time soon as Indian carriers, including a newly-merged Air India/Indian Airlines group and fast-growing private operator Jet Airways, as well as foreign airlines continue to add more belly-hold and maindeck space.

Vikram Paul, Delhi-based vice president Asia Pacific air freight for forwarder UTi Worldwide , said it is generally accepted in India that all infrastructure would have to be substantially upgraded over the next few years if the country was to fully exploit its growth potential.

"If we miss that window of three to five years, then I think we could lose a huge opportunity," Paul said.

In many ways, the same is true of India's air cargo industry. "Infrastructure-wise, there are still a lot of weaknesses here in terms of airport handling performance, a general lack of facilities, the need to further upgrade EDI links with customs," said Paul. "So, yes, I would say the air cargo sector, too, has five years to get its act together or risk missing out on a much bigger future."

One way the Indian government wants to upgrade the country's overall air transport sector is to privatize the management of several leading airports previously operated by Airports Authority of India.

In Delhi, for example, Indira Gandhi International Airport is now run by a public private partnership called Delhi International Airports, or DIAL. It is led by Indian infrastructure organization GMR Group, which has a 50.1 percent stake to AAI's with 26 percent ownership. Other investors include: German airport management group Fraport, 10 percent; Malaysian airport operator Eraman Malaysia, 10 percent; and India Development Fund, 3.9 percent.

DIAL has a mandate to modernize that gateway in time for Delhi to host the Commonwealth Games athletics event in 2010.

DIAL recently reported several major development projects at Delhi were currently on schedule for completion by mid-2008. The projects include a third runway, which is expected to be complete before the opening of a new international and domestic terminal in 2010.

Significant developments are planned on the freight side of the airport's operations, where total annual throughput is projected to increase from a current 420,000 tonnes to about 540,000 tonnes by 2010, and on up to 980,000 tonnes by 2017 and more than two million tonnes by 2026.

At present, all international air freight at Delhi is handled by GMR Group through a 229,658-square-foot terminal. The Indian air transport industry has been expecting an official invitation to offer space for an additional freight handling operation.

Sudhir Mathur, DIAL's chief commercial officer, said the aim was to attract "another cargo handler, one with global experience, to run its own facility."

There was space for a terminal building of between 65,216 square feet to 82,000 square feet, with more land available on the other side of the road for processing activities.

"It will be very basic but we would like it to be built as soon as possible," said Mathur.

Mathur said DIAL was also planning to develop a cargo village on land to the south of the existing freight terminal for warehousing for forwarders and other logistics service providers. "We hope to get the go-ahead to start work by the end of this year," he said.

While welcoming such developments, Indian air cargo industry executives argue that other new innovations are also urgently needed.

In particular, the industry is pushing for the development of off-airport handling services to speed up the throughput of international traffic, both at Delhi and other leading gateways. This would allow export shipments to be delivered to airports in pre-loaded pallets, while import pallets could go directly to customs warehouses or consignees.

Rajendra Varma, regional operations and quality manager for Air France Cargo-KLM Cargo, said there have been some movements of shipper-built export pallets out of Delhi on a "piecemeal basis."

Potentially more significant, however, was the establishment in Chennai earlier this year of the first, and to date only, permanent off-airport station for handling air cargo import traffic. That, said Varma, had involved allowing an inland sea freight station to additionally handle air freight imports.

Now, said Varma, talks were continuing between the Air Cargo Agents Association of India, the Board of Airlines Representatives and Indian customs about the wider development of off-airport handling for both export and import air cargo at other major Indian gateways.

Another key issue requiring attention is the performance of the EDI system linking that sector with the country's customs authority. Airlines and forwarders complain the system is often not working.

Jean-Pascal Cetran, Air France-KLM's cargo director for India, Nepal and Bhutan, said development of EDI clearance was generally moving in the right direction "despite a few hiccups from time to time," but further enhancements were needed.

Forwarders are less sanguine. "The present system is suffering from a lack of updating over the last three years," said UTi's Paul. "The quick fixes are not going to cost that much but it is a question of how you approach the government and customs to get the right responses from them."

Meanwhile, forwarders and airlines are dealing with an unexpected problem with the country's seemingly unassailable export economy.

The Indian rupee has appreciated about 10 percent against the U.S. dollar since the middle of 2006, which has made some of India's traditional flown exports, such as garments, less competitive in U.S. and other world markets. Predictably, this development has led to substantial excess cargo capacity out of some Indian gateways, pushing freight-hungry airlines to push rates down.

"We are being offered rates as low as 20 cents a kilo out of Delhi, which is more than 30 percent down on typical prices in 2005 when the market was stronger," said Sanjay Verma, the locally-based air freight director for international forwarder Geodis Overseas.

While airlines hope 2008 will see some recovery in Indian exports, any such boost could be largely negated by a continuing increase in available capacity as both Indian and foreign airlines continue to expand their services.

National carrier Air India, which recently merged with domestic operator Indian Airlines, publicly stated this year it plans to become more active in international cargo.

The airline launched its first freighter service to Europe at the end of June and now is using converted A310 all-cargo aircraft to link the Indian gateways of Bangalore and Chennai with Frankfurt and Paris, via the Middle East Gulf, four times a week. Air India plans to develop a substantial freighter fleet, initially comprising of converted A310s and 737s, but subsequently also including some longer-haul 747 freighters operated under the name Air India Cargo.

India's largest private airline, Jet Airways, too is targeting cargo as a key business growth sector and has talked about soon acquiring freighter equipment. Right now, the focus is on exploiting the belly capacity on its fast-expanding international passenger service network.

In early September, the airline introduced a five- times- a-week A330-200 service between Delhi and Toronto, via Brussels. Other international points already served by Jet, which currently has a fleet of 66 aircraft including five 777-300 extended range, include Newark, London Heathrow, Singapore, Kuala Lumpur, Colombo in Sri Lanka, Bangkok and Kathmandu, Nepal.

Foreign carriers, too, are enhancing their Indian networks and capacity, with Middle East carriers particularly prominent in the build up.

Examples include Dubai-based Emirates, which was due to add a ninth Indian point, Ahmedabad, to its network last month with a six times a week combination service using the A330-200s. Qatar Airways boosted its Indian coverage to seven cities at the end of September with twice-weekly A320 flights to Nagpur from its home hub in Doha. Qatar plans to follow that up with new services to Ahmedabad in December.

Abu-Dhabi-based Etihad Airways, which flies to Mumbai, New Delhi, Trivandrum and Cochin, recently revealed plans to increase frequencies on existing Indian routes and potentially add up to eight more points in that country.

All three Gulf regional carriers also already operate regular A300 or A310 freighter services to and from various Indian sub-continent points.

Meanwhile, AF-KLM Cargo is due to replace the 747-200 freighter used on services to Europe out of Delhi, Chennai and Bangalore with newer 747-400 extended range freighters.

"The main significance is that the 747-400ERFs will give us a steady payload of 100 tonnes, whereas in the hot temperatures of the Indian summer, the payload on the older aircraft could sometimes be 20 tonnes less," said Cetran.