Aviation ministry's Post plan to give new wings to e-commerce firms

The e-commerce industry in India is expected to get new wings as the civil aviation ministry will soon give final touches to its plan of connecting over 1.4 lakh post offices in rural areas with an air cargo network across the country and abroad.

Currently, India has around 1.55 lakh post offices, of which about 1.4 lakh (around 89%) are located in rural areas.

Civil aviation minister Suresh Prabhu during a recent industry event said, "This (the plan) will connect villages to both – urban domestic markets and international markets – providing free flow of goods through air cargo." Prabhu, who expects India to be among the top five global air freight market by 2025, said that as per the plan any air logistics company will be able to connect with the postal network based on a pre-defined connectivity interface.

Harminder Sahni, founder and managing director of consultancy firm, Wazir Advisors, said the development, if implemented can 'revolutionise' the online retail business in India by bringing down the cost of delivery in remote areas. "In the US, Amazon benefits from robust and cost efficient delivery network of US Post to the extent that Trump accused them of profiting from subsidised public postal system," said Sahni.

However, sceptics say though the plan is grand, it will have no meaning if the authorities are not able to improve the dwell time around the courier due to lack of planning and infrastructure development. The ministry officials, however, said that they are working on improving the high dwell time at airports, which has been the key reason for the slow movement of logistics in India. The dwell time for imported goods which was 72 hours a few years ago has now been brought down to 39 hours at 11 major airports in the country. Dwell time is the average time taken for delivery of cargo and documents from the arrival of the airline to the customer.

According to industry experts, the move will help in reviving rural post offices, which have almost become redundant ever since the internet has taken over as a preferred form of communication. Further, the air cargo industry will also get a boost, as it currently forms a very small part of the total cargo business.

The development comes at a time when the e-commerce industry in India witnessed a compound annual growth rate (CAGR) of 53%, as per the latest report by consultancy firm Bain & Company. According to several estimates, the country's e-commerce market is expected to grow fourfold reaching $150 billion by 2022. The e-commerce market was pegged at $36 billion in 2017.

E-commerce companies, after having swiftly captured the major cities, are trying to spread into the rural segment. It is expected to reach $10-12 billion in the next four years, on the back of increasing penetration of smart phones, improving standards of living, higher propensity to spend, diversified incomes from non-agricultural sources, among others as per an EY report.

According to the civil aviation ministry statistics, air cargo handled at Indian airports grew at a CAGR of 10% during 2013 and 2018. International cargo comprised 60% of the total air cargo handled in India and grew at 15.6% in the year 2017-18 alone. Domestic cargo grew by over 8%, reflecting the skewed modal mix in which roads account for over 60% of cargo transportation as compared to the global average of around 30%.

RURAL CLICKS

• E-commerce companies, after having swiftly captured the major cities, are trying to spread into the rural segment
   
• Sceptics say though the plan is grand, it will have no meaning if the authorities are not able to improve the dwell time around the courier