Gujarat, known for its entrepreneurial spirit and robust export sector, faces challenges due to the prolonged closure of Gujarat Agro Limited’s (GAL) Cargo Complex and the Red Sea crisis. This has led to increased logistical hurdles and soaring air cargo tariffs, burdening exporters with a 40% rise in shipment costs.
The GAL-run Air Cargo Complex, once a crucial channel for exporting about 1,500 MT of cargo per month including perishable items like agricultural products, pharmaceuticals and chemicals, was shut suddenly in June 2023. Compliance issues and lack of approvals forced the complex to shut overnight, diverting export shipments to Mumbai or Delhi, adding to costs and turnaround times.
Additionally, the Red Sea crisis has disrupted global maritime trade, forcing exporters to turn to air cargo shipments. Gujarat, known for its extensive coastline, traditionally depended on sea routes for transportation and felt the repercussions of the crisis. However, the scarcity of air cargo services from Ahmedabad, combined with heightened demand, has led to a substantial increase in air cargo costs. This surge in expenses has impacted shipments to key destinations such as the US, Europe, and the Middle East.
Samir Mankad, CEO and director of GSEC Limited, said, “We are making efforts to resume operations at the cargo centre, but delays in receiving critical equipment from overseas suppliers has hindered progress.”
As a result, export shipments are being diverted to Mumbai or Delhi, not just adding to logistical costs but also the turnaround time.
The dire situation has compelled exporters to resort to air cargo shipments, notwithstanding the exorbitant costs. With only 14 airlines offering cargo services from Ahmedabad, the constrained supply and heightened demand have led to a 40% hike in costs, according to a customs-clearing agent. The repercussions are palpable, with the cost of air cargo to the US skyrocketing from Rs 400 to Rs 700 per kg, and similar spikes observed in shipments to Europe and the Middle East. This surge in expenses, coupled with fluctuating freight rates and space availability, has plunged businesses into a quagmire of dwindling profit margins and logistical nightmares.
Small and medium enterprises (SMEs), especially, are struggling to cope with rising costs and complex logistics, impacting their profit margins and ability to maintain market competitiveness. Atul Shah, honorary treasurer of the Indian Drug Manufacturers’ Association (Gujarat) said, “The Red Sea crisis has led to an increase in sea and air freight costs, leading many exporters to opt for air cargo despite the higher expenses in order to reduce turnaround times.”
For exporters of perishable goods, such as fruits, vegetables, and seafood, the closure of the agro air cargo complex has exacerbated the situation, forcing them to seek alternative transportation methods or face delays in reaching international markets. This has resulted in decreased product quality, reduced market competitiveness, and lower export revenues, posing a significant challenge to industry players.
