Clipped from: https://economictimes.indiatimes.com/news/economy/foreign-trade/passenger-airlines-morph-into-cargo-carriers-how-innovative-thinking-helped-exports-bounce-back/articleshow/78849374.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23
Synopsis—-As soon as the lockdown started, the trucks and container vehicles were stuck on highways at inter-state junctions. Also, there was an acute labour shortage in ports to unload the shipping containers without which new loading could not be carried out.
In September, India’s merchandise exports grew 6% year-on-year. In the normal course, this modest rise would be unremarkable. But in the midst of a raging pandemic and sharp economic contraction, this has come as a source for cheer.
As the department of commerce released the export numbers last week, noting that the uptick was in fact 9.2% in rupee terms, there was euphoria among officials and exporters alike. For many of them, it must have felt like the first sighting of light at the end of a long, dark tunnel. India’s exports, after all, shrank every month since March when a nationwide lockdown was announced to contain the virus. The worst month was April, when exports dropped a staggering 40% year-on-year.
“The rise in exports (in September) is a very healthy sign considering the International Monetary Fund has forecast a 20% decline in global trade for this year. I am hopeful, the trend in export will continue,” Rajiv Kumar, vice-chairman of the government think tank NITI Aayog, told ET Magazine over telephone, adding that the government’s interventions in removing bottlenecks in logistics and labour will ensure the growth in export continues.
Commodities such as iron ore, carpets and pharmaceuticals helped India register a robust export number in September. A thorough analysis of the data for the month as well as for the period between April and September, however, indicate how agriculture products — rice, other cereals, oil meals, oil seeds, etc — played a starring role in scripting the turnaround. For example, exports of rice, mainly to African continent and West Asia, were valued at $725 million in September as against $374 million during the corresponding month last year — a growth of 94%. True, the high numbers could partly be a reflection of low base of rice exports last fiscal year — 5 million tonnes in 2019-20 against 7.5 million tonnes in 2018-19 — but as Vinod Kaul, the executive director of All India Rice Exporters Association, argues, the rise was a result of more nations creating a buffer stock due to the uncertainties associated with this pandemic. “Also, the demand for Indian rice has been growing because our main competitor, Thailand, suffered a drought this year,” he adds.
In case of other cereals, a category that includes maize, ragi and bajra, and those being used for cattle and bird feeds globally, the growth in September was a whopping 337% on a year-on-year basis. Similarly, exports of oil meals and oil seeds in the month grew 47% and 36%, respectively.
Now, if export data of 30 major items for the period between April and September is compared with the data in the corresponding period of 2019, only eight items will be found to be on a positive territory. And among those, six commodities — rice, other cereals, oil meals, oil seeds, fruits and vegetables and cereal preparations — happen to be farm produce, clearly demonstrating the role played by agriculture in India’s Covidtime exports. A senior official of the government agency, Agricultural and Processed Food Products Export Development Authority (APEDA), says there has been an improvement in export of green vegetables to West Asia, the UK and Germany. Also, onion was doing good business till it was banned by the government last month to restrict price fluctuations in the domestic market.
“Among the fruits, mango suffered a lot during this year as India could not export it to its main markets — US, Japan or South Korea. The mango season coincided with the high Covid-restriction period. Between fruits and vegetables, it’s the vegetables that have driven the export numbers up,” says the official, speaking on the condition of anonymity as he is not authorised to speak to the media. Country’s leading grapes exporter and managing director of Euro Fruits, Nitin Agrawal, says grapes exporters were just lucky as the harvesting season ( January-mid April) almost ended when the lockdown began. “Till the lockdown, we harvested about 80%. The rest we did it with government permissions.”
Former Union agriculture secretary, SK Pattanayak, argues the growth of farm exports during the pandemic was primarily driven by the fact that agricultural activities continued even during the peak lockdown period. “Lockdown did not disrupt our regular agriculture activities. So when Covid-19 disrupted the global supply chains, we could take some advantage,” Pattanayak says.
The nationwide lockdown, enforced on March 25, however, obstructed the usual modes of transportation for a month or so. The main hindrance for exporters was disrupted connectivity to the ports. As soon as the lockdown started, the trucks and container vehicles were stuck on highways at inter-state junctions. Also, there was an acute labour shortage in ports to unload the shipping containers without which new loading could not be carried out.
It is in that backdrop that some airlines swung into action, with the permission the Directorate General of Civil Aviation, to carry goods — vegetables, fruits, pharmaceutical products et al — on passenger seats. Many passenger aircraft overnight turned into freight carriers with cargo-onseats becoming a common practice since April.
Since the lockdown, India’s biggest freight carrier, SpiceJet, for example, has operated more than 9,000 cargo flights — many on passenger aircraft — out of which 3,500 were operated on international routes. The destinations included Frankfurt, Amsterdam, Abu Dhabi, Hong Kong, Shanghai and Singapore. “Cargo-on-passenger-seats played a key role in India’s global trade during the lockdown. We carried shrimp seeds and lots of fruits and vegetables to the Gulf countries. Had those not been moved on time, our farmers would have suffered a lot,” says Ajay Singh, chairman and MD of SpiceJet, in a telephonic interview to ET Magazine.
With the world returning to some semblance of normalcy, it is likely that India’s export may remain in the green for some more time. Also, as far as imports are concerned, only two out of 30 major items — medicinal products and vegetable oil — registered growth during the first six months of the current fiscal year, a reason why the overall imports were down by 40%. While this has helped lower India’s trade deficit, it also indicates the prevalence of a weak economic environment.
Even in exports, there are formidable challenges ahead. Indian exporters, for example, are highly concerned about issues emerging out of currency convertibility in Iran, a nation which till recently was among the biggest importers of Indian Basmati rice.
“Despite several challenges, we are expecting to have an all-time high rice export this fiscal. We had a bumper Kharif crop this year and there is no problem on the supply side at all,” says Kaul of All India Rice Exporters Association. But he hints at a serious problem for farmers. “Bumper crop also means a possible price drop”.
We will use A340 aircraft to export agri, pharma products: Ajay Singh, Chairman and Managing Director of SpiceJet
Air freight was a big help to transport goods and emergency equipment during the lockdown. Chairman and Managing Director of SpiceJet Ajay Singh says there is a huge untapped potential for Indian carriers in the freight segment, as foreign airlines today carry about 95% of India’s exports and imports by air. In a telephonic interview with Shantanu Nandan Sharma, Singh, who heads the number 1 freight carrier in the country, says exports by air could grow further. SpiceJet is deploying their new wide-body A340 to ferry big-volume commodities. Edited excerpts:
How did the idea come about to transport fruits, vegetables and pharmaceutical products on passenger planes?
When the Covid lockdown began on March 25 we realised we won’t be able to ferry passengers for quite some time. But goods could still move. In certain cases, no other modes of transportation was available. We, in SpiceJet, immediately pressed into action five freighter aircraft we had. We were also the first airline to seek permission from the DGCA (Directorate General of Civil Aviation) to carry cargo on passenger seats. We knew we wouldn’t be able to quickly convert our passenger aircraft into cargo planes. But yes, we could well put cargo on seats and run passenger aircraft as freighters. We were granted permission.
Plying cargo on passenger seats played a key role in India’s global trade during the lockdown. We carried shrimp seeds, and lots of fruits and vegetables to the Gulf countries. Had those not been moved on time, our farmers would have suffered a lot. These are farm items that can’t wait. So, fruits, vegetables and pharma shipments were placed on passenger seats and exported. In our return flight, we mostly carried pharmaceuticals from countries such as China and Singapore.
Ajay Singh, Chairman and Managing Director of SpiceJet
What are you doing to expand your freight business as the passenger traffic will continue to be subdued for a long time?
In August, we got our first wide-body aircraft, an A340. In September, we got the second one and we are soon getting another. As it is a large aircraft that can carry 50-60 tonnes at one go, our capacity to export will increase substantially. We are expecting to use our new A340s to export agriculture produce, pharmaceuticals and readymade garments, among others. In September, Spice-Jet became the No 2 freight carrier (after Emirates) from New Delhi airport.
We ramped up our freight operations since the lockdown began. Today, our freight operations are three times more than what it was in April. We export a lot of items to the US and CIS (Commonwealth of Independent States) countries. Still there is a huge opportunity to carry more freight to Europe and the US in particular.
But will you be able to compensate for your loss in passenger revenues from freight operation?
There is room for growth. At present, Indian carriers have a market share of just 5% in the country’s export and import by air. Foreign carriers carry 95%. SpiceJet will be a frontrunner to change that equation. We expect to carry more pharma products, mobile phones, auto parts, farm produce, garments, etc. For this, we will make Delhi, and not Mumbai, our hub. We will, however, continue to use Hyderabad and Bengaluru big time for freight traffic.