Bangladesh Exports Are Clogging India’s Air Cargo Capacity

Bangladesh Exports Are Clogging India’s Air Cargo Capacity

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Bangladeshi cargo is slamming Indian airports in what has become a concern for local businesses across the world’s most populous country—while also delivering yet another headwind for India’s already contracting textile economy as exporters fight for air capacity.

According to a report from Indian newspaper The Hindu Business Line, tons of garments out of Bangladesh are being shipped out via Indira Gandhi International (IGI) airport in Delhi, cornering space in aircraft bound for Europe and the U.S.

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From April to December 2023, IGI handled 260,000 metric tons of export cargo, with Bangladesh accounting for just 5,000 metric tons—or less than 2 percent of total air cargo traversing through the airport.

However, this percentage increased dramatically in the January-to-March quarter, with the Bangladesh’s share jumping to 9 percent of total air cargo, or 8,000 metric tons.

The led to congestion and spikes in air freight rates by nearly 300 percent, says Israr Ahmed, vice president of the Federation of Indian Export Organisations (FIEO).

The scenario is a likely result of a February 2023 trade agreement between the south Asian countries, which allows sealed export cargo from Dhaka to arrive directly at IGI with minimal border checks. Earlier, these goods would exclusively be shipped out of Netaji Subhas Chandra Bose International Airport in Kolkata.

And more recently, companies from both countries shifted more goods from ocean freight to air freight in the wake of the ongoing Houthi attacks on vessels traversing the Red Sea, forcing container ships to take an extra week or two to instead travel around southern Africa’s Cape of Good Hope.

Apparel is the lifeblood of Bangladesh’s economy, exposing manufacturers in the country to higher risk when the Red Sea crisis began and freight rates started to escalate. In 2023, Bangladesh exported $47.4 billion in total apparel, representing 85.3 percent of the $55.6 billion in total goods shipped out of the market, according to the country’s Export Promotion Bureau (EPB).

On the other hand, India’s textile sector has seen better days, making the combined pressure of the Bangladeshi-originated cargo and the Red Sea shipping diversions even tougher to endure.

In the 2023-2024 fiscal year, textile exports out of India amounted to $34.4 billion, marking a decline of more than $1 billion, or roughly 3 percent, compared to the previous fiscal year. On a two-year basis, the drop is even more pronounced, with exports plummeting 16.3 percent from 2021-2022 levels, when India reported exports worth $41 billion.

To prioritize Indian air cargo and reduce potential cost pressures on Indian shippers, FIEO is calling on the government to bring in corrective measures, including a “landing charge” on Bangladeshi cargo.

FIEO isn’t the only association seeking government intervention to assist Indian shippers.

In February, Indian apparel exporters body The Apparel Export Promotion Council (AEPC) urged the government to suspend last year’s order that allowed Bangladesh exports to move through IGI’s air cargo complex.

The association argued that the Red Sea crisis has already increased transportation costs of domestic exporters, and also forced the continued shift of export shipments from ocean to air freight.

APEC also believes that allowing Bangladeshi export cargo through Delhi is only going to lead to more backlogs, with chairman Sudhir Sekhri telling The Hindu Business Line that 20 to 30 loaded trucks now arrive to the airport from Bangladesh every day.

Although Indian airports are getting congestion in the short term,

An October report from Bangladesh newspaper The Business Standard said that the country’s air cargo industry is likely to double within the next five years due to growing capacity development in Hazrat Shahjalal International Airport (HSIA), which is currently undergoing expansion.

HSIA can handle up to 900 metric tons of cargo in a day, but typically handles in a 400 to 500 metric tons on average.

“If we can change our policy and improve service quality, the cargo industry will be multiple times bigger by 2041, compared with the current status,” Kabir Ahmed, president of the Bangladesh Freight Forwarders Association (BAFFA), told the publication in October.

He attributed the increase in shippers exporting their goods through India’s Kolkata Airport to the low service quality within Bangladesh’s wider ground operations.

The BAFFA president noted that state-owned air carrier Biman Bangladesh, which handles more than 8 percent of the country’s total export air cargo, still has an opportunity to increase their export share.

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