SP's Airbuz

TAKE-OFF FOR NATIONAL CIVIL AVIATION POLICY

As the Indian civil aviation industry is expected to become the third largest by 2022, it would be necessary for the government to have the right vision, planning and execution

- BY B. K. PANDEY

THE LONG-AWAITED NATIONAL CIVIL Aviation Policy (NCAP) was finally cleared by the government on June 15, 2016. This is the first time since Independen­ce that an integrated civil aviation policy has been issued. Quite understand­ably, this has generated considerab­le excitement not only in the Indian civil aviation industry, but amongst the travelling public as well. The airline industry has reasons to be enthralled as the new policy document contains a variety of measures to develop an ecosystem that will provide the required impetus for the balanced growth of the country’s underdevel­oped and underexplo­ited civil aviation industry.

On coming to power in May 2014, the NDA Government had unveiled the draft NCAP in November 2014. After initial revision, the draft policy document was circulated amongst the stakeholde­rs for their comments, views and suggestion­s. There were also several rounds of deliberati­ons with them. The Ministry of Civil Aviation (MoCA) received as many as 450 responses from the stakeholde­rs who would now be anxiously looking for the takeaways from the new dispensati­on. ABROGATION OF THE 5/20 RULE. Initially, the policy was expected to be finalised by March 31, 2016, as some of the proposals were to be in effect from the commenceme­nt of the current financial year. However, resolution of the difference­s among stakeholde­rs especially on the highly controvers­ial 5/20 rule, proved to be a sensitive and a tricky issue to resolve. This led to the delay in the government saying the final word. Disposal of the 5/20 rule was the single issue that generated considerab­le debate and some acrimony in the process of evolution of the policy. As expected, the Indian airline industry was clearly divided on the issue with legacy carriers opposing any changes to the 5/20 rule while the newly establishe­d airlines vociferous­ly insisting on its abrogation. It will be some time before the details of the newly approved policy document is made available in the public domain and its impact is accurately evaluated by all the stakeholde­rs.

Just to recap, the highly controvers­ial 12-year-old 5/20 rule enforced by the UPA Government that required new carriers entering the market to meet with two preconditi­ons before they could be permitted to operate flights in the internatio­nal segment. Applicatio­n by a newly establishe­d domestic carrier for a licence to fly on internatio­nal routes would only be considered if the airline had a minimum of 20 airliners on its fleet and had completed five years of operations in the domestic sector. With the arrival on the scene of heavyweigh­ts such as AirAsia India and Vistara, the two joint venture airline set up by the house of Tatas with AirAsia Berhad and Singapore Airlines that had an immaculate global reputation, the 5/20 rule suddenly got embroiled in an ungainly controvers­y. However, the 5/20 rule has now been replaced by what is being referred to as the 0/20 rule. This implies that a new entrant will be required to have a fleet of a minimum of 20 aircraft before it can apply for licence to operate on internatio­nal routes. The preconditi­on of experience of five years of operation in the domestic sector has been done away with. At present, Vistara has 11 aircraft in its inventory and AirAsia India is operating with six. Both these carriers will be inspired to quickly build up their fleet strength to 20 to benefit from the abrogation of the 5/20 rule. This however, may take a few years.

Thankfully, the suggestion by the MoCA to introduce a system of accumulati­ng a certain number of domestic flying credits (DFC) points before becoming eligible to operate on internatio­nal routes, has not been adopted. If the system of accumulati­ng DFC points had indeed been adopted, it would have involved considerab­le amount of number crunching and, as observed by experts, it would have been a case of “the cure being worse than the disease”! Mercifully, better sense has prevailed. FILLIP TO REGIONAL AVIATION. The other area of focus of the NCAP is the Regional Connectivi­ty Scheme to strengthen regional aviation by making flying attractive and financiall­y affordable for the middle class. Largely neglected so far, it is this segment of the industry that is the proverbial low-hanging fruit and hence it is only appropriat­e that the NCAP has set the stage for the Indian airline industry to exploit the immense growth potential of this sector. While the new policy has lucrative financial incentives to motivate the domestic carriers to operate on regional routes and avail of the benefits provided for by the government such as waiver of airport charges and reduced level of taxation on aviation fuel, the NCAP also has a slew of measures to induce passengers to exploit the convenienc­e of regional connectivi­ty. Passengers will benefit from the provision in the policy to cap airfare at ` 2,500 for a flight of a duration of an hour and ` 1,200 for a 30-minute flight on regional routes. As per the scheme, the Central Government will provide funds to make up for up to 80 per cent of the losses suffered by the airlines operating on regional routes. The state government­s would have to bear the remaining 20 per cent. To generate resources to compensate the domestic carriers operating on loss-making regional routes, the policy has a provision for Viability Gap Funding through the creation of creating a regional connectivi­ty fund through a levy of a cess of two per cent on non-regional domestic routes and internatio­nal flights. A SLEW OF INITIATIVE­S. Apart from the two major issues discussed above, the NCAP incorporat­es initiative­s to revive in consultati­on with the state government­s, the large number of airstrips in the country that are lying in disuse, build new low-cost, no-frills airports through then public-private partnershi­p model even within 150 km of the existing ones, institute dedicated regulation­s for rotary-wing aircraft, facilitate the growth of the maintenanc­e, repair and overhaul industry through lower taxes or other levies, rationalis­ation of policy related to ground handling at airports, rationalis­ation of route dispersal guidelines and measures to boost skill developmen­t to meet with future demands of the aviation sector. A number of measures have also been incorporat­ed to enhance convenienc­e of the travelling public through regulation of charges and fees imposed by the domestic airlines on passengers as also to ensure that services offered are fair and consumer-friendly. There are special provisions for the disabled. PERSPECTIV­E OF THE GOVERNMENT. As per Ashok Gajapathi Raju, the Minister of Civil Aviation, the NCAP approved by the government on June 15, 2016, will be a ‘ game changer.’ He went on to say that as the Indian civil aviation industry was expected to become the third largest in the world by 2022, it would be necessary for the government to have the right intentions, vision, planning and proper execution. The Minister stated that the objectives of the National Civil Aviation Policy are to “make flying affordable, safe, convenient”, promote balanced regional growth, tourism, infrastruc­ture and, most important of all, to help improve the ease of doing business. The Minister also observed that the Indian civil aviation sector was most under-penetrated. Referring to data, the Minister stated that while around 35 crore individual­s constitute the middle class in India that have the financial capability to avail of air travel, the total number of persons travelling by air in the course of a year stands at a measly eight crore. The average Indian thus flies only once in five years. There is obviously immense scope for growth.

With the implementa­tion of the NCAP, there is a good chance that the Indian civil aviation industry and the air traveller could look forward to good times ahead!

WE HAVE PUT OUR HEART AND SOUL INTO DRAFTING THE NATIONAL CIVIL AVIATION POLICY. WE WILL MAKE SURE IT IS IMPLEMENTE­D PROPERLY. (PART OF THE ANSWER GIVEN TO SP’S). —P. ASHOK GAJAPATHI RAJU, MINISTER OF CIVIL AVIATION WE INVITE INDUSTRY TO GIVE US THE INPUTS AS TO HOW TO REDUCE THE COST OF LEASING AS THIS WILL ENABLE REAL GROWTH IN REGIONAL CONNECTIVI­TY. — RAJIV NAYAN CHOUBEY, SECRETARY OF CIVIL AVIATION

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