Positive outlook seen for India’s air cargo industry

India’s air cargo industry is expected to handle 2.8 million tonnes of cargo by 2018, increasing at a compounded annual growth rate (CAGR) of 5.5 per cent mainly due to the relaxation of Foreign Direct Investment (FDI) limits by the government, says a study carried out Netscribes, a market research agency.

Last year, the market size was 2.26 million tonnes and experts said that the industry will maintain the growth path for at least the next five years, according to the study.

The government’s focus on attracting foreign direct investment has proved to be a major boost for the industry, the study said. “Allowing 100 per cent FDI in existing airports and under automatic routes along with 100 per cent tax exemption for airport projects for the next 10 years, have been major growth drivers,” a Netscribes analyst said.

The government has also identified 24 airports across the country for the development of cargo terminals. “Airports located in tier-two and tier-three cities have been identified where common user domestic cargo terminals will be established after checking feasibility,” the Minister of State for Civil Aviation, Mahesh Sharma, said.

The Airports Authority of India (AAI) has already established common user domestic air cargo terminals at Coimbatore, Jaipur and Lucknow airports.

The report also highlighted the challenges faced by the Indian air cargo market due to the lack of dedicated air cargo warehousing facilities at major airports and restrictions on sanctioning of licences for operating bonded warehouses.

With increasing trade activities in the Asia-Pacific region, the Indian air cargo industry has the second fastest growth rate in the world, ranking just behind the Middle East. As per the study, international air cargo traffic is expected to grow at an average rate of 4.7 per cent year-on-year over the next two decades.