The Indira Gandhi International Airport in Delhi has been authorized by the Indian government to function as a major transshipment hub between the eastern and western parts of the world, making it one of the largest cargo handling centers. This move also allows the Delhi airport to serve as a transshipment point for neighboring countries in the subcontinent, beginning from February 7.
The cargoes of the neighbouring countries will be exported to some of the very prominent markets of western countries. As the first shipment of this kind, Delhi Airport will export a cargo shipment from Bangladesh. As per the reports, the first batch of cargo, which arrived at the Delhi airport from Bangladesh on February 26, left for its destined location in Spain on Sunday, March 5, 2023.
Going forward, all shipments originating from Bangladesh and destined for western countries will be routed through the Delhi hub exclusively. The cargo transshipped from Dhaka will be transported to the national capital via the Indo-Bangla border at Benapole-Petrapol.
At the Petrapol border, the cargo will undergo all necessary security checks. Once the security officials provide clearance, the manufacturers will be able to monitor the shipment’s entire journey, including its arrival at the Delhi airport, security clearances, and final loading onto the aircraft for transportation to its intended destination.
DIAL, a subsidiary of GMR Airports Infrastructure Ltd., has established a specialised truck docking facility and dedicated X-ray area to facilitate the smooth transfer of cargo to its outbound locations. It is estimated that Dhaka Airport currently operates some 250 cargo flights a month, handling about 15,000 tonnes of cargo—mostly ready-made garment shipments.
The shortage of air freight capacity has been a significant hurdle for Bangladesh’s garment exporters. Whether this development is beneficial or detrimental ultimately hinges on market trends and the advantages and disadvantages of air cargo.
Air cargo: a holistic analysis
According to the International Air Transport Association (IATA), air cargo accounts for 35 percent of global trade by value but only 1 percent by volume. The air cargo industry transports almost $6 trillion worth of goods each year. This means that air cargo is preferred over sea cargo for light-weight products. Weight limitations, higher carbon emissions, and a significantly hefty price tag place air cargo below sea transport. But air cargo is critical to serve markets that demand speed and reliability for the transport of goods.
High-value commodities such as electronic consumer goods, machinery, computing equipment, documents, pharmaceuticals, and textiles account for the highest share of air-borne trade tonnage versus its waterway counterparts. Seasonal shipments and products with shorter shelf lives—namely, cut flowers, fresh fruits and vegetables, meat, etc.—also make regular use of air freight services. So it will not be wrong to say that air trade certainly has its own competitive advantages over container ships.
Now that we know what the advantages of air cargo are, it becomes crucial to look at the market trends for air-borne trade all over the world. As far as the market trends for air freight are concerned, the figures say it all. From 2012 to 2019, there was no year where revenue declined until 2019. In 2019, air cargo revenue plunged to $102.4 billion. The loss was almost $9 billion.
But later, it continued to grow at a promising rate. In 2020, it recovered with an increase of almost 26 percent to $129 billion. During the pandemic, the growth trend continued. In 2021, air cargo revenue jumped to $155 billion. The never-witnessed hike actually served two purposes. On one hand, it provided an alternative to disrupted supply chains, and on the other hand, it became the medium for transportation of life-saving personal protective equipment, medical supplies, and vaccines.
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Significance of India-Bangladesh transit relations
Delhi Airport is the largest cargo hub airport in the South Asia region. It has two integrated cargo terminals that handle 1.8 million metric tonnes of cargo annually. It can be scaled up to 2.3 million metric tonnes as per the requirements.
The Delhi transshipment will provide an alternate route to the manufacturers and suppliers of the subcontinent for the exports. The route will reduce the time it takes for the shipment to reach its destination and will also reduce the cost of the export. The time reduction is a significant advantage of this route.
Since June 2020, Bangladesh has been using the Kolkata air cargo complex. But the flight connections from Kolkata were few, and so Bangladesh was not able to take advantage of the route. Although Bangladesh has its own air cargo complex at Hazrat Shahjalal International Airport in Dhaka, it is now looking up to India. The security issue at its own air cargo complex led the EU to ban the cargo from Bangladesh.
However, even after the ban was lifted, Bangladesh was unable to achieve the desired growth in export shipments. While boosting its own capacity, it has now started using India as a medium for its trade with western countries. The main reasons for choosing India are:
- India is geographically close to Bangladesh and thus, provides a convenient transit point for goods being shipped to other parts of Asia, the Middle East, and Africa.
- India has a well-developed transportation infrastructure, including seaports, airports, and highways, which can be used to facilitate the movement of goods.
- India has trade agreements with many countries that can help facilitate the export of goods from Bangladesh.
- India is a large market for many products, including textiles, which are a major export of Bangladesh. Using India as a transit point or logistics hub can help Bangladeshi exporters access this market and expand their customer base.
Meanwhile, Bangladesh is aiming to become a transshipment hub for the region and has opened its sea and land ports to neighbouring countries to achieve this ambition. As part of a transit agreement signed between Bangladesh and India, Indian vessels have been utilising the Chattogram and Mongla ports since 2022. This agreement was signed in October 2018, and the ports can now be used for the movement of goods to and from India via Bangladesh territory.
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Delhi Airport: Historical role of India as a transshipment hub
The Indian government’s approach to world affairs and its neighbours has been very interesting. New Delhi is not only making its own special space in world affairs with its unique voice but also working to revitalise the glory of India. The aspiration to make Delhi the centre for transshipment is also aligned with that.
In the past, world trade was based on sea routes. During around 800 CE, ocean shipping emerged as a reliable and satisfactory means of transportation for trade, facilitating the exchange of sought-after commodities among Africa, India, and China along established trade routes in the Indian Ocean. This led to the creation of a trade network in the Indian Ocean, enabling economic powers such as the Persian Empire and the Caliphates of Turkey to engage in commerce and exchange goods.
The Indian Ocean acted as a crucial link, connecting East Asia, the Middle East, India, and Africa, and over time, this well-established network came to be known as the Indian Ocean Trade Route, considered one of the most significant trade networks in human history.
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Government’s initiative
But with the advancement of technology and the introduction of airborne trade, air cargo has become a crucial aspect of exports. And so, the government of India is keen to strengthen its scope and make it an important medium supporting the growing economy. In line with that, the government unveiled its much-awaited National Air Cargo Policy in 2020.
The objective of the policy is to position India as one of the leading air freight markets globally by 2025, while also establishing air transport hubs at major airports within the next six years. Additionally, the policy intends to capitalize on India’s strategic location as a transit hub connecting Europe and Southeast Asia, as well as serving as a gateway to the South Asian region.
And hence, the Indira Gandhi International (IGI) Airport—Delhi transshipment hub became the first to launch a dedicated transshipment centre exclusively for cargo services. The ‘Transhipment Excellence Centre’ facility is approximately 70,000 square feet in size and can handle an estimated 20,000 tonnes of cargo per month.
Speaking at the 10th annual event of Air Cargo Forum India (ACFI), Union Minister of Civil Aviation Jyotiraditya Scindia emphasised the target of handling 10 million metric tonnes (MMT) of air cargo by 2030, along with the promise to develop 33 more cargo terminals.
During the last few years, air cargo handling by Indian aviation has been very promising. This change is also backed by the PM Gati Shakti Scheme, which focuses on increasing infrastructure and its interconnectedness.
Before 2014, the air cargo handled by Indian airports was only 1.5 MMt, which has now increased to 3.14 MMt with a Combined Annual Growth Rate (CAGR) of 13 percent. However, there is a need for a greater increase in the CAGR to achieve the target.
The Delhi transshipment hub and its handling of large Bangladesh exports will certainly prove to be a big success for India’s growing air cargo exports and global connectedness. And with Bangladesh, it is just a start. For immense benefits, other countries of the subcontinent will also use this facility in the future. Once the air cargo complex systems of India become robust, it is no wonder that the countries of Southeast Asia too start using Indian transshipment hubs.
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