More trade for India–Middle East
With the growth of global and regional trade, especially between Europe and Asia, opportunities rise aplenty in the Middle East due to its favourable geographic location. Experts from the aviation and freight forwarding industry share their views on the s
According to International Air Transport Association’s (IATA) forecast 2014-18, India is the second fastest growing air cargo market after the Middle East and is expected to grow at a compound annual rate of about seven per cent over the next five years. Airlines from the Middle East region such as Emirates, Etihad, Qatar and Saudia to name a few, are proactively finding their niche in the Indian market with new routes and tie-ups, giving tough competition to other airlines.
The Middle East has strong demand in gems, jewellery, garments, pharma products, tea, machinery, instruments and fabrics and perishables such as fruits, vegetables, flowers and meat. Trade between the countries has escalated with the UAE becoming India’s largest export destination. Imports and exports had been narrowly focused. For the most part, raw gems and crude oil have been shipped from the Gulf to India. However, the majority of exports to Dubai from India include precious metals and stones, food items (fruits, vegetables, dairy products and processed items), machinery spares and plastic goods (conduits, pipes, tapes, goods like trays).
Prime Minister Narendra Modi’s visit to Middle East may lead to a augmentation in bilateral trade.
CARGOTALK spoke to airlines and freight forwarders about opportunities between India and Middle East.
Commenting on the trade between the two, Bharat J Thakkar, Past President and Permanent Member, Board of Advisers, ACAAI and Joint Managing Director, Zeus Air Services says, “The Middle East is the most important region when it comes to the Indian air cargo industry. Airlines from the region are giving tough competition to other carriers from Europe, Asia and America. The rise of the gulf carriers in the Indian air cargo industry has been a muchtalked about topic among the fraternity. Irrespective of the competition, the Middle East airlines keep on hogging headlines for their expansion in the Indian sky.”
Jassim Saif, Vice President – Commercial Cargo, North Africa and West Asia, Emirates SkyCargo, shares, “The Indian air cargo industry has great potential for growth as cargo activities are performing below their potential. Also, the Indian GDP is growing at 7.5 per cent and the Indian logistics sector is valued at US$100 billion, which is 2.5 per cent of the global market. Currently, bi-lateral trade between India and the UAE hovers at US$70 billion each year and is set to reach $100 billion by 2020. Dubai has developed air cargo infrastructure including state-of-the-art cargo terminals, automated storage and handling systems, warehousing, EDI and connectivity. Emirates SkyCargo is equipped to leverage this strength, and boost imports and transhipments from India.”
Sanjiv Kumar, Executive Director – Cargo, Air India, says, “The total bilateral trade between India and the Middle East is more than US$150 billion. During the Prime Minister’s visit, both countries agreed to increase bilateral trade by 60 per cent over the next five years. The proposed India-UAE Infrastructure Investment Fund is meant to support investment in India’s roads, ports and airports which should increase efficiency.”
“With the trade thriving between India and the Middle East the opportunity for logistics is tremendous. All carriers and logistics companies have been re-working their strategies and directing their energy to customers who trade in this lane. Airlines and shipping lines have been increasing their capacities to cater to this demand,” opines Yashpal Sharma, Director, Skyways Group.
“With the Middle East airlines also expanding rapidly, the growth in India-Middle East trade has benefitted them and supported their expansion, in terms of passenger and cargo. With the PM’s visit, I would expect trade with the UAE to grow by 25-30 per cent over the next two to three years,” Sharma adds.
“India needs massive FDI (Foreign Direct Investment) in sectors including air cargo infrastructure, warehousing, cold storage, and automated systems and UAE has huge sovereign funds to help,” says Saif.
“The UAE’s growing role as a regional trading hub will make it India’s top export destination by 2030, displacing the US. According to the GOI figures, in FY 2014-15, trade between India and UAE crossed US$59 billion, with India exporting goods worth US$33.3 billion to the UAE and US$26 billion worth of UAE’s exports to India, thus making UAE among the top trading partners of India,” highlights Naresh Gehaney, Vice President – Air Freight (India), Haiko Logistics.
“The Middle East is a major transit point for much of the freight to Europe and America. There is scope for increasing the freight to the Middle East as a destination from India, specifically for companies which specialise in covering meat, vegetables, pulses as this is a niche market. Most of the freight companies, especially the larger ones, are not active in this lane,” avers Shesh Kulkarni, President & CEO, UFMI.
David Kerr, VP – Cargo, Etihad Airways says, “India is an important market for Etihad Airways. We cover 11 gateways in India with 14 freighter frequencies a week. Apart from our wide-body operations, the airline offers Indian businesses great opportunities through our global network as well as access to the UAE.”
He adds, “e-commerce, pharmaceuticals, auto components and perishables are some of the key growth drivers for air freight in and out of India at present. Our operations are currently served via 11 online points. From India we are offering solutions to customers looking to move goods to Africa, Europe, US, Latin America, the Middle East, Far East and the sub-continent. Our links with India were developing through the strategic investment and partnership of Etihad Airways with Jet Airways.”
Speaking about the challenges, Saif says, there are aero-political issues over capacity and imbalance. Infrastructure remains a challenge, including cold storage, automated systems and warehousing. The rupee slide is one of the major concerns. Emirates will come under increasing pressure as the value of the Indian currency continues to slide. The decline in oil prices will affect the Gulf economies. This scenario will have implications for foreign workers and will have a knock-on effect on imports. A major problem facing air export from India is the lack of Electronic Data Exchange (EDI) and interconnectivity between the customs, the Airports Authority of India, airlines, agents and shippers. This leads to delays in export shipments.”
“Logistics companies have plans to buy their own aircraft. This will potentially add a new dimension to the competitive landscape,” he says.
“We have challenges of capacity to stations like Abu Dhabi, Muscat where we still have narrow body operations. There are also customs constraints in India for cargo, especially courier traffic, coming in from the Middle East,” says Kumar.
“Systems and processes are not there. If there is a concern, finding a solution is a challenge because there is no seamless operation. At every point, you have to identify your route to a solution. We have IT and automation issues, high charges and customs issues to name a few,” says Vipin Mohla, Associate Vice President – Cargo, Indigo.
“Currently, there are significant changes underway to enhance the infrastructure at Abu Dhabi Airport, with the development of the new Midfield Terminal project, scheduled for completion in 2017. Airports in India are also undergoing rapid change to meet the needs of our growing passenger and cargo operations,”,emphasises Kerr.
“The Gulf and the Middle East countries are mostly liberal in their global trading orientation due to their dependence on foreign trade. However, a few structural and policy rigidities might pose challenges for India. The presence of trade barriers such as periodic import bans on certain vegetable and live animals, multiple bilateral/regional issues or complexity and the absence of trade strategy and promotion are few of the challenges,” shares Satish Lakkaraju, Head of Sales - Air & Sea Logistics, Dachser India.
“However there are two major challenge that one faces with these countries, first is very short transit time both by air and sea. Even before the documents can be released from the bank the cargo arrives and secondly the high temperature in transit and limited refrigeration facilities which results in temperature excursions, in turn causing damage to cargo,” adds Lakkaraju.
Speaking on the challenges, Sharma says, “Movement of goods to most of the important countries like UAE, Saudi and Kuwait is very easy and smooth. But movement of goods in some of the other countries including Iran are logistically challenging due to inadequate infrastructure in their hinterland. Unrest in countries like Iraq, Syria has also made things difficult for customers to trade and LSP’s to service businesses.”
“Handling of freight is seeing huge growth on Middle Eastern carriers. Cargo is no more a bastion of European airlines, Gulf carriers have completely nudged out the Europeans in this space. But, Middle East carriers are still facing challenges in gaining larger acceptability of carrying temperature controlled pharma cargo over Middle East to Europe, America and Latin America,” pointed Kulkarni. “Though leading Gulf carriers have robust temperature controlled handling facility, but the process is still not doing the necessary magic to boost the levels.”
“Cargo security is a pressing concern, especially as the country positions itself as an international multi-modal logistics platform. As screening of cargo becomes more stringent, the challenge for officiating bodies in the country is to strike a balance between addressing the need for cargo security while permitting international trade and commerce to thrive,” informs Gehaney.
Bharat J Thakkar Past President and Permanent Member - Board of Adviser, ACAAI and Joint Managing Director Zeus Air Services
David Kerr Vice President – Cargo Etihad Airways
Yashpal Sharma Director Skyways Group
Jassim Saif Vice President – Commercial Cargo North Africa and West Asia, Emirates SkyCargo
Sanjiv Kumar Executive Director – Cargo Air India
Shesh Kulkarni President & CEO UFMI
Satish Lakkaraju Head of Sales Air & Sea Logistics India Dachser India
Vipin Mohla Associate Vice President – Cargo Indigo
Naresh Gehaney Vice President – Air Freight (India) Haiko Logistics