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India’s air cargo industry has always flown against headwinds—high airport charges, fragmented policies, and uneven infrastructure. Now, a new shock has thrown the sector into fresh turbulence: Donald Trump’s sweeping 50% tariff on Indian exports. For a business built on speed, predictability, and seamless global flows, the tariff is proving deeply destabilizing.
Over the past decade, India diversified export markets while cementing the U.S.—its second-largest trading partner—as a crucial destination. Pharmaceuticals, textiles, gems, electronics, and perishables move daily to American hubs. That momentum is suddenly under threat.
Margins that were already thin have all but vanished. With tariffs doubling the landed cost of goods, demand has collapsed. Exporters are shelving shipments, forward bookings on key routes such as Delhi–Chicago and Mumbai–New York have slowed to a crawl, and carriers report load factors sliding below break-even.
What the tariff shock has brutally exposed is the fragility of India’s air cargo competitiveness. Industry leaders have long warned of policy distortions—most notably the “royalty pass-through” system embedded in India’s Public-Private Partnership (PPP) airport model. Capt. Preetham Philip, (left) CEO of Quikjet, India’s only dedicated cargo airline, is blunt: “The royalty mechanism is the structural flaw at the heart of India’s cost problem.”
Here’s how it works: private airport operators levy royalties—sometimes as high as 45% of gross turnover—on Independent Service Providers (ISPs). These costs are simply passed down the chain, inflating invoices for airlines and shippers. India’s Airports Economic Regulatory Authority (AERA) has criticized the practice as “not commensurate with the cost or quality of service” and even proposed caps. But the uncapped regime persists, rewarding the highest bidder rather than the most efficient operator.
The result is a cost structure that makes India one of Asia’s priciest air cargo markets. Airports under PPP consistently charge multiples of their Airports Authority of India (AAI) counterparts. Where royalties soar, competitiveness collapses.
This debate is not new. In 2012, the Ministry of Civil Aviation convened a Working Group on Air Cargo and Express Services to map a long-term growth path—dismantling bottlenecks, unlocking efficiencies, and aligning with India’s economic rise. More than a decade later, most recommendations remain unimplemented. Costs remain high, frameworks outdated, schemes fragmented.
The Krishi Udan scheme for perishable exports illustrates the gap between ambition and execution. Spanning eight ministries, it lacks a dedicated budget, relies on fee waivers rather than systemic fixes, and often falters due to missing cold storage, equipment, and integrated logistics. Worse, by ignoring royalty-driven ground and handling charges at PPP airports—where most high-value cargo flows—it offers only partial relief.
India’s struggles are stark when compared to China’s Aerotropolis model. There, airports are treated as strategic enablers, not profit centres. Subsidies, fee waivers, and industrial integration transform them into engines of trade.
The Zhengzhou Airport Economy Zone is emblematic: a 415 sq km ecosystem built around Xinzheng International Airport, seamlessly connecting logistics, bonded trade, and manufacturing. At its heart is Foxconn’s iPhone assembly plant, employing 200,000 workers and exporting half a million smartphones daily. By tying airports to industry, China has built hubs of global competitiveness.
India, by contrast, risks being trapped in a toll-booth model—airports as rent-extracting assets rather than catalysts of commerce.
Global supply chains are in flux, with companies diversifying beyond China. India has a rare chance to capture a greater share of time-sensitive, high-value exports—from electronics to pharmaceuticals. But unless it tackles structural inefficiencies head-on, the opportunity could slip away.
In the near term, Trump’s tariffs are forcing recalibration. Routes may shrink, freighters may redeploy, and exporters will renegotiate terms. In the longer term, the lesson is clear: without deep reform, India’s air cargo sector will always be flying into headwinds—whether from Washington, Beijing, or its policy blind spots.
Tirthankar Ghosh
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