- India’s air cargo costs are inflated by a flawed PPP model that passes airport royalties directly onto airlines and shippers.
- PPP-run airports often charge 2–15 times more than AAI-run airports for the same services.
- The Krishi Udan scheme offers only marginal relief, leaving the biggest cost driver—the royalty—untouched.
India is on the verge of missing its moment in the global air cargo race—and the reasons are no mystery. The sector’s competitiveness has never been dictated solely by market forces; it has been shaped, and often shackled, by the country’s policy framework and strategic choices. For years, industry voices have warned of the need for a coherent cargo policy—one that delivers modern infrastructure, full-scale digitalisation, and regulatory efficiency. Their calls have largely gone unanswered.
“Air cargo is a fundamental driver of trade expansion and economic acceleration,” stresses Dr. Vandana Singh, Chairperson of Aviation Cargo at the Federation of Aviation Industry in India (FAII) and a respected leader in aviation and logistics. “But this requires strategic investments in technology, infrastructure, and policy reforms to ensure seamless connectivity and efficiency.” With the government pledging to handle 10 million metric tonnes of cargo within the next three to five years under Mission 2030, the gap between ambition and readiness is dangerously wide.
This is not a new conversation. Back in 2012, the Ministry of Civil Aviation convened a Working Group on Air Cargo/Express Services to chart a long-term roadmap for the industry. It brought together all major stakeholders to address structural bottlenecks, unlock growth opportunities, and align air cargo expansion with India’s rapid economic rise. Yet, more than a decade later, only a handful of those recommendations have seen the light of day.
Today, optimism may be the prevailing mood, but the data tells a more sobering story. The Indian air cargo sector remains hobbled by a cost structure that is as flawed as it is counterproductive. Its underperformance is not a byproduct of tough market conditions—it is the predictable result of a policy design that prioritises short-term revenue collection over long-term strategic growth. The danger is clear: without urgent reform, India’s air cargo ambitions could once again be grounded before they truly take flight.
In a White Paper titled A Strategic Course Correction for Indian Air Cargo: A Blueprint for Global Competitiveness, which will be submitted to the Ministry of Civil Aviation, Capt Preetham Philip, CEO of Quikjet, has flagged the distorted cost structures that air cargo stakeholders are forced to absorb.
The biggest driver of India’s inflated air cargo costs is not fuel, labour, or technology—it’s an inherent flaw in the Public-Private Partnership (PPP) model: the “royalty pass-through” mechanism. Under this system, private airport operators charge Independent Service Providers (ISPs) a royalty for the right to operate on-site, often as a percentage of gross revenue. Crucially, this royalty is treated as a pass-through cost—service providers simply add it to their bills, pushing the burden onto airlines and, ultimately, shippers.
The Airports Economic Regulatory Authority of India (AERA) has called the royalty “not commensurate with the cost or quality of service” and proposed capping it at 30% of turnover—a clear admission that the current uncapped system distorts competition. In practice, it rewards the highest royalty bidder, not the most efficient service provider, locking the sector into rent-seeking rather than innovation.
The result is a costly and inefficient market. PPP-run airports consistently charge more than those managed by the Airports Authority of India (AAI)—sometimes absurdly so. For a domestic landing of a standard 79 MT aircraft, AAI-run Chennai charges ₹7,241, while Adani-run Jaipur and Thiruvananthapuram charge ₹102,305 and ₹110,600, respectively—a 15-fold difference for the same service. Cargo handling tells the same story: a 20,000 kg domestic shipment costs ₹9.60/kg at AAI-run Kolkata but ₹16.23/kg at Adani-run Ahmedabad—nearly 70% more.
The pattern is clear: where royalties run high, so do costs. And until this structural flaw is fixed, India’s air cargo sector will remain trapped in a high-cost, low-efficiency loop, stifling competitiveness before it ever gets off the ground. The White Paper outlines the costs of a 20,000 kg shipment on a 79 MT aircraft. The Airport Charges for Ahmedabad are ₹371,637.46, which works out to ₹18.58 per kg rate for domestic cargo. In Thiruvananthapuram it is ₹364,488.96 for ₹18.22 per kg, for Lucknow it is ₹346,014.94 at ₹17.30 per kg, while for Kolkata it is ₹216,860.40 at ₹ 10.84 per kg.
India’s costliest cargo airports—Ahmedabad, Thiruvananthapuram, Lucknow, and Jaipur—share two things in common: they are run by private consortia, and they levy ground-handling royalty rates of 45% or more. By contrast, major hubs such as Delhi, Hyderabad, and Bangalore, where royalty rates are a more moderate 15–18%, post significantly lower per-kilogram costs. The disparity is glaring and points to a clear need for targeted regulatory intervention.
Into this uneven playing field comes the Krishi Udan Scheme, designed to help farmers move perishable produce—especially from remote regions—to wider markets. But a deeper look reveals the scheme does little to fix the structural flaws embedded in India’s airport cost framework.
Krishi Udan is a “convergence scheme” spanning eight ministries and departments—from Civil Aviation to Agriculture to Commerce—creating a labyrinth of coordination, delays, and friction. It lacks a dedicated budget, relying instead on fee waivers from the Airports Authority of India (AAI) and by dovetailing into existing schemes. The result: inconsistent funding, limited reach, and unpredictable outcomes.
Even where the scheme applies, many regional airports lack the backbone infrastructure needed for perishable air freight: adequate cold storage, modern handling equipment, and the integrated logistics networks required for an unbroken cold chain.
Krishi Udan tries to soften freight costs by waiving aeronautical charges—landing and parking fees—at certain AAI-operated airports. But cost-stack analysis shows the bigger culprit is the royalty-driven ground and cargo handling charges at major PPP-operated hubs. These are the gateways through which most high-value international cargo flows—yet they remain entirely outside the scheme’s scope.
The net effect is a programme that offers temporary, localised relief while leaving the single largest cost driver untouched. In that sense, Krishi Udan’s shortcomings are more than an implementation failure—they are diagnostic. They prove that without structural reform of India’s royalty regime, no amount of sector-specific subsidies will deliver a truly competitive, sustainable national air cargo ecosystem.
Capt. Philip’s White Paper cites Guwahati airport as a textbook case of India’s flawed high-cost model. Airport charges—landing, ground handling, warehousing, and a 45% royalty on handling—total about ₹16.95 per kg. For a 20,000 kg load, that’s ₹339,000 before the aircraft even takes off.
Perishables get no reprieve: Guwahati is excluded from the Krishi Udan scheme, leaving farmers to absorb these costs. On top of ground charges, a Boeing 737 freighter costs ₹1.19 million to operate on the 2.5-hour Guwahati–Delhi route, or₹59.75 per kg. Together, the breakeven cost touches ₹77 per kg—far beyond what farm produce can bear. As a result, most shipments move by road, arriving late, degraded, and devalued.
This isn’t inefficiency in farming—it’s policy-induced uncompetitiveness. A comparison with China shows the impact: by scrapping royalties, waiving landing fees, and subsidising handling and fuel, the breakeven cost would fall nearly 40% to ₹50.50 per kg, making the route viable.
India risks missing its moment in the global air cargo race—not because of market forces, but because of its own policies. Under the PPP model, airports are treated as revenue assets, not strategic infrastructure. The royalty system—where operators charge Independent Service Providers a cut of gross revenue—pushes costs onto airlines and shippers, making Indian logistics among the most expensive in Asia. This rent-seeking approach deters investment in high-value, time-sensitive sectors like electronics and pharmaceuticals.
China shows a different path: it has concentrated on creating aerotropolises, Capt Philip’s White Paper points out. There, airports are strategic investments: heavily subsidised, fee-waived, and integrated into industrial policy. Profitability for the operator is secondary to national competitiveness. This model has turned China into a global hub for advanced manufacturing and exports, while India struggles to keep pace.
China’s Aerotropolis strategy is best exemplified by the Zhengzhou Airport Economy Zone (ZAEZ)—a 415 sq km hub where air connectivity drives high-value manufacturing. Anchored by Zhengzhou Xinzheng International Airport, the zone integrates logistics, bonded free trade facilities, and multimodal links with large-scale industry. At its core is Foxconn’s iPhone assembly complex, employing 200,000 workers and producing nearly half a million smartphones daily for export. Favourable policies and infrastructure make ZAEZ not just an airport but a powerful engine of industrial growth and global trade.
Adding to the challenge is the unchecked poaching of Indian pilots and engineers by foreign airlines. Carriers that have ordered over 2,000 new aircraft are trapped in a cycle of training talent, only to lose it overseas—crippling fleet expansion and innovation.
India cannot afford piecemeal fixes. What’s needed is a bold shift: dismantle the royalty regime, adopt Aerotropolis-style airport development, and implement a unified National Air Cargo Policy. Airports must be engines of growth, not toll booths.
The choice is stark: continue with short-term cost recovery and watch opportunities slip away, or embrace strategic investment and claim a rightful place in global trade. The time for tinkering is over. The time for decisive reform is now.
