Delhi Acting As Bangladesh Export Hub Under Question Amid Red Sea Crisis

Since the last week of February, Delhi’s leading clothing manufacturer 16th July has had trouble sending its goods to other countries because air freight rates have come abnormally high and the Delhi International Airport has been struggling with capacity. 

"Cargo rates per kilo have increased from Rs 250 to Rs 465, and the airport wait times have increased. Previously, our cargo was shipped the next day of booking a shipment, but now we have to wait roughly ten days for our shipments to be exported," said Darpan Thakar, founder of the 16th July, told The Core.

The crisis comes bang in the middle of the apparel industry's peak business season that runs from December to April. This is when companies like 16th July export garments for the summer collection across the world.

The logistical ordeal has had an impact on his business, with customers waiting for the situation to stabilise before placing new orders. This, Thakar explained, “has a direct impact on our rotation. On the other hand, we are suffering the increased cost, which impacts our margins”. 

But what’s causing this chaos at the Delhi Air Cargo complex? 

Since February 2023, the Delhi airport has functioned as a trans-shipment hub for clothing exporters from Bangladesh. However, the escalating Red Sea crisis has exacerbated existing pressures. With air freight costs soaring and a surge in demand for air cargo services, capacity constraints are now affecting Indian exporters.

"When Bangladesh exports began coming to Delhi, we did not see any commotion, and capacity was adequate until last November. However, rates rose in tandem with ocean-to-air conversions starting in December, affecting our business. The Inditex cargo coming from Bangladesh into India is using up our capacity," said Ruby Abidi, director of air cargo at cargo-partner, told The Core. 

What Was The Deal With Bangladesh? 

For a year now, Bangladesh has been exporting clothes to European countries such as Spain, France and the Netherlands through India. Shipments to Spain alone reached approximately 124 metric tonnes.  This made Delhi the largest cargo hub in South Asia. 

The decision to let Bangladesh exports pass through Delhi was a reciprocal gesture — India has been using Bangladesh’s Mongla and Chattogram ports since 2022. It was aimed at boosting the national economy while lowering shipment costs for manufacturers and increasing daily international cargo exports via the GMR-run Delhi Airport.

This was supposed to be a milestone for the Delhi airport and India-Bangladesh ties. 

A year later, the Red Sea crisis is playing spoilsport. “India wants to have a strategic relationship with Bangladesh. I feel that these kinds of challenges will be physically short-term, because, over a while looking into the business, airlines will, of course, augment the capacity. So it's a short-term challenge. It has been aggravated because of the Red Sea crisis,” said Dr Ajay Sahai, director general and CEO of the Federation of Indian Exports Organisations. 

Red Sea Crisis A Logistical Nightmare

Iran-backed Houthi attacks on the Red Sea, a crucial shipping route globally, have shot up air freight rates. This is because exporters are forced to shift their cargo from sea freight to air freight. In the Indian context, adding Bangladeshi exports to the mix has allegedly worsened the situation, claim stakeholders. Prices that were supposed to increase by 1.5x or 2x are rising by 3x, 4x, and even 5x in some cases.

“Earlier for Europe, we paid Rs 90-100 per kilo. Now, we are paying something like Rs 280 to 350 per kilo. And for the US, anything from Rs 480 to Rs 600 kilo, this is horrible,” said Sudhir Sekhri, chairman of the Apparel Export Promotion Council (AEPC), told The Core.  

According to Observatory of Economic Complexity, an online data visualisation and distribution platform, Bangladesh's top exports are knit T-shirts ($9.06 billion), non-knit men's suits ($8.82 billion), knit sweaters ($8.02 billion), non-knit women's suits ($6.63 billion), and knit women's suits ($4.08 billion), with the majority exported to the United States ($11.7 billion), Germany ($10.2 billion), the United Kingdom ($4.86 billion), Spain ($4.41 billion), and Poland ($3.53 billion).

"In terms of container capacity, the scarcity affects both garments and other items. So, there is obviously a shortage in capacity, and the trucks coming in from Bangladesh are worsening the problem," said Sekhri.

According to Sekhri, trucks arriving from Bangladesh were being given priority over Indian cargo. After this was pointed out to GMR, it has become a first come first serve system. “But there's still a lot of hustle and chaos.” 

Before February 2023, the trans-shipment of Bangladesh export cargo, the biggest competitor for India in the textile sector, was only permitted through the Kolkata Air Cargo complex.

Are Bangladeshi Exports The Problem? 

Exporters and freight forwarders are hoping that the government will notice the situation and take some action. 

Sekhri said that while the Indian government may not be able to do anything about the Red Sea crisis, it can take action at home. “The government of India can stop the movement of shipments from Bangladesh to Delhi,” said Sekhri.

Last month, AEPC  wrote to the government to suspend the trans-shipment of Bangladeshi cargo. 

“I think we should either look at adding more capacity or temporarily hold on the trans-shipment cargo which is making freight rates high and thus the commodities too. This would hamper export orders from India,” said Abidi.

Sahai, however, has a different perspective. He believes that one has to look into the broader objective of allowing shipments from Bangladesh. 

“I hope that this issue will be sorted out and probably that will bring much relief on the air shipment also,” Sahai said. 

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