Insights into Editorial: Chinks in the new aviation policy armour
20 June 2016
The Union Cabinet recently cleared the Civil Aviation Policy in order to boost the domestic aviation sector and provide passenger-friendly fares. This new policy aims at providing various benefits to domestic airline passengers.
The Policy aims at:
- India to become 3rd largest civil aviation market by 2022 from 9th.
- Domestic ticketing to grow from 8 crore in 2015 to 30 crore by 2022.
- Airports having scheduled commercial flights to increase from 77 in 2016 to 127 by 2019.
- Cargo volumes to increase by 4 times to 10 million tonnes by 2027.
- Enhancing ease of doing business through deregulation, simplified procedures and e-governance.
- Promoting ‘Make In India’ in Civil Aviation Sector.
- Ensuring availability of quality certified 3.3 lakh skilled personnel by 2025.
What’s there in the new policy:
- Capping of fare: Rs 1,200 for 30 minutes and Rs 2,500 for hour-long flights.
- A single window for all aviation related transactions, complaints, etc.
- 5/20 rule scrapped. Under the new rules, airlines must still have 20 planes before they can fly internationally, but no longer need to have operated for five years.
- Start-up airlines can now fly abroad after operating at least 20 planes or 20 per cent of their total flying capacity, whichever is higher, on domestic routes.
- Restoration of air strips at a maximum cost of Rs 50 crore through Airports Authority of India (AAI).
- India will have an open-sky policy for countries beyond the 5,000-km radius from Delhi on a reciprocal basis. This means that airlines from European or Saarc countries will have unlimited access, in terms of number of flights and seats, to Indian airports, leading to increased flight frequencies with these countries.
- Permission for Indian carriers to get into code-sharing agreement with foreign carriers for any destination within India.
- More focus on ease-of-doing business as government plans to liberalise regime of regional flights.
- The government will look to develop about 350 dilapidated or underused airstrips across India into “no frills airports“.
- Four heli-hubs to be developed. Helicopter Emergency Medical Services to be facilitated
- Development of greenfield and brownfield airports by State government, private sector or in PPP mode to be encouraged.
- The earlier proposed 2% cess on all regional flights has been done away with. The cess was proposed to collect funds to improve regional infrastructure.
Shortcomings in the new policy:
- The policy has touched almost every aspect of civil aviation, but gives no direction for professionalising the Directorate General of Civil Aviation (DGCA) and Bureau of Civil Aviation Security (BACS), crucial entities that govern aviation safety and security in the country. Though measures have been announced to strengthen both these entities and bridge the deficit, the policy is silent on how to radically transform these organisations to meet modern-day challenges and to be process-driven to deliver world-class service.
- The NCAP is also silent on the formation of an independent Civil Aviation Authority (CAA). The policy also does not say what the government is doing with Air India and the way forward for the airline.
- Airports Authority of India (AAI) is another entity that needs complete transformation, yet NCAP falls short of addressing that. There is little clarity on the way forward for the AAI or about its listing in the stock exchanges. According to analysts, this is a big negative as India’s massive airport infrastructure development plans requires a strong entity to see the execution through. Analysts feel that the AAI focuses heavily on capital expenses.
- The policy is silent on long-term plans for airport development. Industry observers expected directions on the hiving off Air Navigation Services (ANS) from the AAI and making it an independent, professional body.
- Doing away with 5/20 rule in international flying and relaxation to just 20 aircraft without any domestic flying criteria will not help new carriers like Vistara and AirAsia India significantly as they cannot fast track expansion owing to a resource crunch.
- The NCAP gives no direction on removing the negative fiscal regime on Indian airlines which includes sales tax on ATF and other taxation measures. These have not been effectively addressed.
- The policy has not given any direction for improvement in regulatory and policy-making competence. There has been no direction on improving institutional capability in the Ministry of Civil Aviation.
- The policy also doesn’t provide the civil aviation sector with the institutional infrastructure required for long-term growth. The helicopter industry will structurally change with the announced measures, but its success is dependent almost entirely on DGCA, BCAS and infrastructure development.
Making the first-ever integrated aviation policy was tough. The road ahead will be tougher as we implement it. The policy is well-intentioned, but private capital is unlikely to flow to loss-making projects. What the government should do is to clear the way for entrepreneurs to move into the civil aviation sector removing all manner of hurdles. Steps should be taken to minimise anti-competitive practices among individual airlines. The government has gone a few steps forward but there is still a long way to go to remove all shortcomings. India needed an aviation policy which is strategically aligned and supportive of PM’s bold and inspiring vision for the Indian economy.