MUMBAI: Indian cargo market is estimated to reach 2.8 million tons by FY 2018 at a compound annual growth rate of 5.5 percent, says a report by Frost & Sullivan.
Increased aggregate demand due to encouraging international trade and gross domestic product (GDP) trends have been the primary driver of air cargo services in India.
Country’s merchandise export and import registered a double-digit average annual growth rate of 9.5 percent during the fiscal year (FY) 2009-2013.
The total market opportunity for air cargo services in the country amounted to 2.26 million tons in FY 2014 and is estimated to reach 2.8 million tons by FY 2018.
'The relaxation of the cap on foreign direct investment (FDI) in the aviation sector has given a strong thrust to the air cargo market,' said Srinath Manda, Program Manager, Transportation & Logistics Practice, Frost & Sullivan.
'The Indian Government’s FDI policies have been particularly favorable towards private participants entering the market. Major policies fuelling market growth include the allowance for 100 percent FDI in existing airports and under automatic routes as well as 100 percent tax exemption for airport projects for the next ten years.'
However, the lack of dedicated air cargo warehousing facilities at India’s major airports has slowed down market development.
'Evidently, opportunities for market participants lie in common user cargo terminal development and management at airports, domestic air cargo carrier services, commercial and passenger cargo handling at airports, and perishable cargo storage facilities development and operation,' added Manda.
Domestic air cargo operations have been limited as most warehousing facilities cater to international cargo owing to the dearth of space in tier II and III cities.
Further, the restrictions imposed on providing licenses to operate bonded warehouses has been causing severe capacity constraints and impeding the air cargo market.