Fruits, anyone?

MUMBAI: As the world opens up for time-sensitive exports, the volume of trade by air is growing like never before. Perishable exports from Mumbai airport rose 14% in 2005-06 to 41,733 tonnes, after an 8% drop in 2004-05, as a result of the government���s renewed focus on air cargo and greater connections to key markets overseas.

For SMEs in the perishables business, growth is not coming cheap. There���s more competition than ever before in Mumbai���s air exports market. Says Kaushal Khakhar, Kaybee Exports in Mumbai: ���Earlier there used to be a few key players with good margins and quality products selling to wholesalers in the west.

Today, there are over 35 big exporters and competition is such that even marginally lower quality gets sold at lower prices. Top quality exporters are now facing a price war, which they can ill afford. Today margins of 2-3% are considered great and a margin of 10% is fantastic.���

He adds: ���Kaybee is able to realise better margins due to the value-addition that enables them to sell their products ��� fruits and vegetables ��� to supermarkets in the UK and Europe directly.��� Typically Kaybee does a whole series of activities like pre-kitting, kitting, labelling and sorting, and then directly exports them to the UK.

As a result, Kaybee���s margins are appreciably better, he says. Last year Kaybee paid over Rs 10 crore as freight fees to the airlines. With turnover likely to be in the region of Rs 25 crore, it is likely to be one of the largest air exporters from Mumbai.

In another part of Mumbai, Koushik Jagthani runs Satchi Exports, exporting fruits and vegetables, mainly to London and then to the rest of Europe. His 2005-06 sales were Rs 20 crore and now he���s sitting pretty on orders that will keep him busy for most of 2007.

���My turnover has risen 40% this year,��� he says sitting in his head office at Chembur, a Mumbai suburb. With more flights out of Mumbai, capacity is not much of a constraint. While many exporters buy from the Mumbai market, Koushik prefers to source all his fruits and vegetables from Dharmapur in Gujarat.

From there he trucks them down to Sahar airport in Mumbai, which he has to reach in D-5 time. In other words, his perishable cargo has to be screened at the air-conditioned air cargo complex at Sahar 5 hours before departure of the flight. He owns three trucks of 5-7 tonnes, which are used to ferry goods to the airport.

Air cargo carriers aren���t making merry, though. They���re going through a catharsis as well. Keki Patel, cargo manager, Emirates Sky Cargo, Mumbai, says perishable uplifts have shown no major upsurge this year ��� at best, it���s same as last year.

���There are many more airlines flying into India now than ever before with daily schedules. Added to that, between November 2006 and February 2007, under the open skies policy, airlines can bring in larger aircraft, with more cargo space as well. That has created competition in Mumbai.���

With more than enough flying options to all major hubs, including London, agents also shop around for the best deal. For instance, London is serviced not just by British Airways but also by Jet, Sahara and Virgin. He adds: ���So it���s the best time for exporters, but not so much for the carriers!���

Besides, the sea route is increasingly being preferred over the air route when cargo has to be shipped to places like the Middle East, Far East or even Europe. This is because ocean cold chain logistics has improved considerably in their containerisation, traceability, temperature maintenance systems and port handling.

The net impact, says Patel, is there in price competition. ���Air carriers can���t drop fuel surcharges and insurance charges as these are fixed. In order to keep the belly full, carriers have to drop freight rates,��� he says.

Also, the change in rules that forbid export of meat carcasses by air has added to their woes. Earlier, this accounted for a bulk of meat exports by air. Now only boneless meat can be exported, under very stringent packing norms, which has added to costs and resulted in a drop in meat exports by air.

The problem, according to exporters and carriers, starts at the airport. In peak season, it���s not uncommon that mangoes are not cleared in time for the D-5 ( five hours prior to loading) deadline. If that happens Koushik has to lug the produce back to his cold storage facility and catch the next day���s flight.

The Sahar air cargo complex has four screening machines, but only two are in use, as there aren���t enough security officers to man all four machines due to a lack of trained manpower. The end result is long queues, with the produce exposed to 22-25 degree C heat for around 2-3 hours before being loaded onto the aircraft.

Another issue is the lack of adequate number of ground handlers for perishable cargo. Most exporters would love a more flexible and customer-oriented attitude that is lacking at present, with the result that delays are frequent due to issues beyond the control of the company.

The material, once weighed, screened and unitised (palletised or packed ready for loading), is ferried from the cargo terminal to the passenger terminal, which takes about 20 minutes.

All this time, the perishables are out under the starry sky. Given that passenger aircraft want to get off the ground as fast as possible, the cargo has to be aligned at the bay by the time the incoming aircraft comes to a stop. Add all the logistics involved, and it���s not a pretty picture.

Despite these and other problems, the fact is that the quantum of perishable exports is rising all the time. The numbers paint a pretty picture. Air India was the largest perishables carrier in 2005-06, with a tonnage of well over 12,000 tonnes, followed by Emirates at 5,121 tonnes and Gulf Air at around 2,600 tonnes followed by Cathay Pacific at 2,092 tonnes.

SMEs who are into perishable exports may be racing against time, but clearly, it���s one race they seem to be increasingly winning.