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   Vol. 23 No. 25
Tuesday May 28, 2024

Indian Garment Exporters New Normal

Banglasdeshi fabric

     Indian Exporters—especially those in readymade garments—were looking forward to this summer. But, like the rising summer heat, the air cargo market has seen a steady rise. The India-Europe air cargo rates, according to freight forwarders, are “going through the roof”.
     Air cargo rates, for example, from Chennai to Munich around February were Rs 96 ($1= Rs 83) per kg but today it is hovering around Rs 250. It is a good time for the carriers, though. As Xeneta (the leading ocean and air freight rate benchmarking and market analytics platform) mentioned, with stable capacity, the load factor from India to Europe climbed to 87% in the week to March 24. It was the highest since April 2022. “This increasing load factor has also distorted the usual relationship between weight breaks. Traditionally, larger cargo volumes (more weight) are charged at a cheaper per kg price than smaller volumes (less weight). However, in the week ending March 24, the general cargo spot rate for +1,000 kg reached $3.50 per kg, above the spot rate for +500 kg which stood at $3.46 per kg.”
     Adding to freight forwarders and exporters’ woes is the congestion in Delhi airport. Since February 2023, Bangladesh has been sending its RMG consignments to Delhi’s Indira Gandhi International (IGI) airport, according to a trade agreement between the two countries: India and Bangladesh. The agreement permits sealed export cargo from Dhaka to move directly to Delhi airport with minimal border checks. Earlier, export goods from Dhaka were being sent to Kolkata international airport in India.
     FT readers might remember the report about the Delhi International Airport becoming a transshipment centre. The first batch of cargo left Dhaka on February 26, 2023 reached the Delhi Airport on March 3 and left for Spain on March 5. It may be mentioned that the airport had created a special truck docking facility and a dedicated X-ray area for the fast transfer of cargo to outbound locations.
     At the launch of the transshipment facility, Videh Kumar Jaipuriar, CEO, Delhi International Airport Limited had said, “The Delhi airport is on its way to become the global cargo hub of the world, serving as a transshipment center between the East and the West. Globally, most manufacturing takes place in South and Southeast Asian nations, which lack freight and handling capacity. This is where Delhi airport can help countries come together, help businesses and economies of neighboring nations to prosper.”
     Sanjiv EdwardThe CEO’s colleague, Sanjiv Edward, (right) CEO for cargo at GMR Airports (operator of Delhi International Airport), was quoted saying that Bangladesh exports since February 2023, totalling more than 8,000 tonnes from Delhi, was "a significant milestone". He also said that Delhi Airport was “playing a pivotal role in enhancing bilateral ties between India and Bangladesh, particularly in facilitating the seamless export of Bangladeshi cargo to global markets, cementing the airport's status as the foremost cargo hub in Southeast Asia."
     The volume of export goods from Bangladesh has risen with the Red Sea crisis.
     These consignments from Bangladesh have been hogging space in international carriers going to Europe and the U.S. Result: there is little room for Indian exporters. As an Indian exporter, who did not wish to be named, pointed out, “We have to pay a premium to get some space on aircraft. Otherwise, it is almost impossible to get space.”
     The figures from Delhi airport point to the volumes from Bangladesh. From April to December 2023, Delhi airport handled 260,000 tonnes of export cargo, with Bangladesh accounting for just 5,000 tonnes or less than two percent. In the March 2024 quarter, of the 90,000 tonnes handled, Bangladesh’s share was 8,000 tonnes or 9 percent.
Shovon Islam     For Bangladesh’s exporters, sending out consignments from Delhi is more cost-effective than Dhaka Airport. Shovon Islam, (left) managing director of Bangladesh’s Sparrow Group, was quoted saying: “The airfreight cost from Dhaka to New Jersey stands at $6 per kilogram, while it is only $4 from Delhi airport. Similarly, the airfreight cost from Dhaka to New York is $8 per kilogram, whereas it is only $5 from Delhi airport. Additionally, the airfreight cost from Dhaka to Madrid or London is $5.5 per kilogram, compared to only $4 from Delhi airport."
     Delhi, according to Bangladesh exporters, offers competitive prices due to the high number of direct flights and chartered cargo services across various routes.
     In a recent move, the Federation of Indian Export Organisations (FIEO, the apex trade promotion organization in India) has demanded that the government implement corrective measures to boost Indian air cargo exports. One of the measures FIEO has suggested to the Indian government, is to impose
a “landing charge” on Bangladeshi cargo. Speaking on the same line, India’s Apparel Export Promotion Council (AEPC), also wanted the government to stop transshipment of Bangladesh’s export cargo through Delhi airport.
     According to Indian exporters, Bangladesh exporters could pay high rates since they could fall back on the Generalized System of Preferences (GSP)—GSP removes import duties on products sent from developing countries—in Europe and Western markets.
     It is important to note that apparel exports from India have seen a downturn. The export of readymade garments fell to $13.05 billion between April 2023 and February 2024, compared to $14.73 billion during the same period last year. During the same period, the value of yarn shipments declined to $4.23 billion from $4.47 billion.
Sudhir Sekhri     According to Sudhir Sekhri, (left) Chairman, AEPC, “the continuing Red Sea crisis has already increased logistical costs for the exporters and it has also led to a shift of export shipments from sea to air mode. At this crucial time, allowing Bangladeshi export cargo from J. KrishnanDelhi Air Cargo Terminal will further increase the logistical challenges and increase the transportation cost for apparel exporters. Around 30 trucks from Dhaka come to Delhi every day. This extra load has caused slowdowns in cargo clearance in addition to the high rates and space crunch faced by exporters. The severe congestion at the Cargo Terminal at the IGI Airport, Delhi has resulted in exports of Indian apparel through Delhi air cargo complex becoming uncompetitive,” Sekhri said.
     Air cargo veteran and Air Cargo Agents Association of India (ACAAI) Advisor from Chennai, J Krishnan, (above right) pointed out that the lack of space in Delhi has been affecting other Indian airports. He termed the crisis confronting Indian air exports, as “a double jeopardy”: lack of space and freight rate increases.
Tirthankar Ghosh

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