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.
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.
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.
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.
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.
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