Open up the In­dian skies to boost business

Tak­ing a look at the op­por­tu­ni­ties, chal­lenges that the or­gan­ised, semi-or­gan­ised and un­or­gan­ised seg­ments of the In­dian ex­press in­dus­try faces, and the fac­tors that would play a role in shap­ing the in­dus­try, there are sev­eral sce­nar­ios that come to mind.

Cargo Talk - - Guest Column -

The In­dian ex­press in­dus­try is one of the fastest grow­ing sec­tors in In­dia and has at­tained a size almost equiv­a­lent to the shipping in­dus­try. How­ever, the In­dian ex­press in­dus­try is char­ac­terised by frag­mented and un­or­gan­ised play­ers; the share of or­gan­ised play­ers es­ti­mated at 65 per cent. Of the bal­ance, while the EMS (In­dian Postal Depart­ment) holds a 10 per cent share, 25 per cent is held by the un­or­gan­ised seg­ment.

The In­dian ex­press in­dus­try can be broadly clas­si­fied into or­gan­ised, semi-or­gan­ised and un­or­gan­ised seg­ments. The semi-or­gan­ised and un­or­gan­ised play­ers mainly op­er­ate at in­tra-city level and niche do­mes­tic mar­ket. The struc­ture of the in­dus­try can be gauged from the fact that although there are more than 2,000 play­ers op­er­at­ing in the coun­try, only 20-25 play­ers op­er­ate on a na­tional level.

Semi-or­gan­ised seg­ment

Play­ers in this seg­ment op­er­ate within a limited ge­o­graph­i­cal area. Semi-or­gan­ised play­ers have their own net­work in which they op­er­ate, as in they tie up with other sim­i­lar play­ers in the neigh­bour­ing re­gion(s); some also ac­cept in­ter­na­tional con­sign­ments, which are shipped through coload­ers, who act as whole­salers ac­cept­ing size­able lot of con­sign­ments from small play­ers and hand­ing it over to or­gan­ised play­ers. Some play­ers op­er­ate in­de­pen­dently with­out any dis­tri­bu­tion net­work of their own. Such com­pa­nies book the con­sign­ments for any des­ti­na­tion and then hand them over to or­gan­ised or semior­gan­ised play­ers.

Un­or­gan­ised seg­ment

Here, the op­er­a­tions are limited to a city. Such com­pa­nies are largely found in met­ro­pol­i­tan and semi-met­ro­pol­i­tan ci­ties. They have ded­i­cated per­son­nel for col­lec­tion and dis­tri­bu­tion of con­sign­ments; the de­liv­ery sched­ules be­ing based on the ur­gency of con­sign­ments. Almost the en­tire mar­ket is ac­counted for by doc­u­ments.

Op­por­tu­ni­ties

The In­dian ex­press in­dus­try is ex­pected to grow at an im­pres­sive an­nual rate of 20 per cent to 25 per cent over the next few years. In or­der to main­tain its com­pet­i­tive­ness, com­pa­nies op­er­at­ing in th­ese in­dus­tries are ex­pected to out­source their lo­gis­tics re­quire­ments to third party lo­gis­tics ser­vice providers and con­cen­trate on their core com­pe­tency of man­u­fac­tur­ing.

Fur­ther, the open­ing up of bank­ing, in­surance, tele­com and re­tail sec­tors would boost the de­mand for value added ex­press ser­vices in In­dia as th­ese are the ma­jor users in­dus­tries. De­vel­op­ment of in­fra­struc­ture and open­ing up of In­dian avi­a­tion sec­tor are other pos­i­tives for the in­dus­try. Value added tax (VAT), which is likely to re­place state and cen­tral taxes, is likely to en­hance the ef­fi­ciency of the lo­gis­tics in­dus­try and sub­se­quently lead to a shift of con­tract lo­gis­tics business from un­or­gan­ised play­ers to or­gan­ised play­ers.

Chal­lenges

The sig­nif­i­cant chal­lenges that the In­dian ex­press in­dus­try might face in the com­ing years are in­crease in fuel cost, short­age of skilled man­power and in­creas­ing com­pe­ti­tion. Fur­ther­more, the amend­ments to the In­dian Postal Act, if en­acted, will pose a ma­jor threat to the in­dus­try. Some of the sig­nif­i­cant changes pro­posed in­clude re­strict­ing FDI in the in­dus­try, grant­ing the postal depart­ment an ex­clu­sive right to han­dle ship­ments up to 300 grams, an­nual re­newal of play­ers of the in­dus­try and con­tri­bu­tion of 10 per cent rev­enues to­wards univer­sal obli­ga­tion fund. How­ever, it will be pure courier com­pa­nies who will bear the brunt of reg­u­la­tions rather than large ex­press firms, which pri­mar­ily op­er­ate higher in the value chain.

The air cargo in­dus­try serves as a key en­gine of eco­nomic growth and de­vel­op­ment. It sup­ports trade and in­vest­ment, pro­motes con­nec­tiv­ity, and im­proves ef­fi­ciency and com­pet­i­tive­ness.

Dil­jeet Singh is the Chief of Sales

and Mar­ket­ing of Gati KWE

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