Raj Dias
vice president, South Asia,
Phoenix International
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Dias |
Dias has an interesting perspective on the boomtown that is India. As an executive with logistics company Phoenix International, Dias shuttles between his office in Southern California and India regularly, and thus is well placed to judge where India's shortcomings and advantages lie. In a talk with Namaste in December, Dias spoke about corruption in India, the underlying issues in India's air cargo sector, and how the non-vessel-operating common carrier market here is developing.
Namaste: An issue that keeps coming up in India is the regulatory inefficiencies and inherent corruption in getting goods into and out of the country. What are the main problems from your perspective and is the situation getting any better? If it is improving, exactly how so?
Dias: Bribery is an issue in India. This form of corruption is perceived by many in our industry to be customary and not really a hindrance. However, it does not go unnoticed and efforts are being made to reform the system.
The primary factors contributing to this situation are greed, ignorance, apathy and a sense of entitlement. In many countries there is a large attitude gap between upper and lower-level government employees towards work and concern for the success of the people. There is a belief that some government employees feel they are paid only to show up and that fast or friendly service should cost extra.
To date there has been little improvement and reform, but more and more discussions are taking place about corruption in many areas. We have great hope that this focus will be a harbinger of positive change. India's growing international business community will bring new ideas and methods for productivity, and I look forward to this generation bringing about a reformation of the old ways.
Namaste: Give your perspective on the state of the air cargo market in India. There's lot of discussion about the aviation industry, but the airports are so lacking in capacity, and the industry so fledgling, can shippers rely on good service and good rates? And why would they choose air freight over ocean freight if both suffer from infrastructure bottlenecks, since the advantage of air freight is speed?
Dias: The state of the Indian air freight market is chaos when compared to most developed countries, but in general, it works. Transit times are not as fast as they could be. It may take more time for cargo to move from Mumbai Airport to Mumbai final destination than it did to move from the factory in Japan to Mumbai. But this is business in India. While sometimes frustrating it is also not unexpected, and plans are made accordingly. In any industry that experiences an almost 50 percent increase in three years (for example, in India from 2004 to 2007), growing pains are to be expected.
There are many factors contributing to the widely varying air freight transit times. One airline may take two weeks to move cargo from San Francisco to Bengalooru (Bangalore) via Mumbai, with the final leg taking 13 of those days. Customs clearance may take seven days at one airport but only one day at another airport farther away. So if cargo is shuttled to a more distant airport the transit time may actually be shorter. In some instances this strategy may result in a 5 percent cost increase, whereas other times it may be a 50 percent increase.
Bottlenecks may occur regardless of the shipping method. Air freight is still the fastest option with an average three days time from landing to release of cargo. Although this is two days or more than times in most other places, it is still much faster than sea freight.
Rates to India are very reasonable and on par with Western Europe and North America. When compared to countries nearby, Indian freight rates are a bargain.
Currently air capacity is in excess of demand. An emerging new class of degreed technology and business consumers in India is creating more of a demand for air passenger and cargo space, but the domestic air infrastructure will continue to be a factor for the next few years. International air rates are quite low these days, yet still may not meet consumer needs as there is continuous pressure for cost reductions from around the globe.
Air freight volume at all airports in India rose 21.5 percent in 2006-2007, up from 15.6 percent in the previous year for an annual growth of 19 percent. India’s air cargo has been increasing at a faster rate for the past three years compared to the 10.3 percent growth rate for shipping and 9.2 percent growth rate for rail freight in the same period.
More airlines have come in to carry freight. There are now more than 60 carriers operating in India. While the infrastructure at many of India's airports and air cargo complexes is being taxed by gridlock, privatization efforts and the introduction of merchant airports is being approved by the government and will hopefully soon alleviate some of the pressure.
Keep in mind that some shippers will select the air freight mode over other modes based on their commodity regardless of price. If this were not so, many carriers would not operate with marginal yields (for exports).
Namaste: What are Phoenix's key markets in India and in what goods sectors? Why have you found success with those geographic areas and specific shippers? Also, what initially brought Phoenix to India in the first place?
Dias: Phoenix's key markets are the major Indian cities such as Mumbai, Bengalooru, Delhi, Chennai, Pune, Ahmedabad, etc. We have not made efforts to specialize on products or sectors within the country though this is in our plan. We are also supporting our clients' key market efforts in the U.S., China and Western Europe.
Our initial impetus for investment in the India market was driven by our current customers' demand. We wanted to be able to better serve our American, European and Asian clients as they entered into the marketplace or grew their business with India. We also realize the immense potential the Indian market holds for us all.
One of the key factors to our success so far has been our meticulous planning regarding entry into the market as well as the phenomenal effort put forth by our teams in India and around the world. We focus on efficient service, transparency and competitive pricing. We also strive to make things as easy for the customer as possible and that takes a lot of behind the scenes work in India.
Namaste: As a logistics company moving cargo in and out of the country, what is your wish list for improvements?
Dias: Faster transit times, lower costs and fewer variables are at the top of our wish list. The reformation of trade laws and regulations has potential to decrease both times and costs. We hope for these changes to become more apparent and consistent. Stable fuel prices would be a blessing for everyone. Rate changes and surcharges are very disruptive. Improvement of the domestic transportation and road networks will provide much-needed assistance to our industry as well.
Namaste: Give some clarification as to what is actually happening over here for NVOs, forwarders and logistics companies.
Dias: In terms if what is happening is that the local NVO companies have grown in stature as they refine themselves to be pure NVOs. This is a direct result of the forwarder market getting more crowded and the U.S./European forwarders coming in. The multinational forwarders have added supply-chain, warehouse, distribution and reverse logistics services to their portfolios. The small parcel business will grow, leading to more warehousing infrastructure capabilities.