TRANS­FORM­ING IN­DIAN AVI­A­TION

“Civil Avi­a­tion Pol­icy gives an im­pe­tus to af­ford­abil­ity, re­gional con­nec­tiv­ity, safety, in­fra­struc­ture—all vi­tal for trans­form­ing In­dia”. — Prime Min­is­ter Naren­dra Modi

SP's Airbuz - - Front Page - BY R. CHANDRAKANTH

FIRST AND FORE­MOST, NO Prime Min­is­ter of In­dia has taken as many de­vel­op­ment ini­tia­tives in just two years into one’s term like the way Prime Min­is­ter Naren­dra Modi has. Com­ing to power on the plank of de­vel­op­ment, Prime Min­is­ter Modi, along with his team, has been as­sid­u­ously work­ing hard to trans­form In­dia into a ma­jor eco­nomic power. And that can­not hap­pen with­out civil avi­a­tion which has the ca­pa­bil­ity of pro­vid­ing a mul­ti­plier ef­fect to de­vel­op­ment. In the his­tory of in­de­pen­dent In­dia, this is the first time an in­te­grated civil avi­a­tion pol­icy has been put in place to pro­vide an ecosys­tem for the har­monised growth of the dif­fer­ent avi­a­tion sub­sec­tors – air­lines, air­ports, cargo, main­te­nance, re­pair and over­haul (MRO) ser­vices, gen­eral avi­a­tion, aero­space man­u­fac­tur­ing and skill de­vel­op­ment.

On June 15, 2016, soon af­ter the Union Cabi­net ap­proved the Na­tional Civil Avi­a­tion Pol­icy, the Prime Min­is­ter said that it will “trans­form” the avi­a­tion sec­tor and “greatly ben­e­fit pas­sen­gers”. On Twit­ter, he said, “Civil Avi­a­tion Pol­icy gives an im­pe­tus to af­ford­abil­ity, re­gional con­nec­tiv­ity, safety, in­fra­struc­ture—all vi­tal for trans­form­ing In­dia.” 300 MIL­LION AIR TRAV­ELLERS. The pol­icy has a road map to sup­port 300 mil­lion air trav­ellers in five years and steps to make air travel af­ford­able and con­ve­nient. The premise is that if ev­ery mid­dle class In­dian takes just one flight in a year, it would re­sult in a sale of 350 mil­lion tick­ets, a big jump from 70 mil­lion tick­ets sold in 2014-15 in the do­mes­tic sec­tor. This would fruc­tify only if fly­ing was made af­ford­able and ac­ces­si­ble. The pol­icy ob­jec­tives are: Take fly­ing to the masses by mak­ing it af­ford­able and con­ve­nient. Es­tab­lish an in­te­grated ecosys­tem which will lead to sig­nif­i­cant growth of civil avi­a­tion sec­tor to pro­mote tourism, em­ploy­ment and bal­anced re­gional growth. En­hance re­gional con­nec­tiv­ity through fis­cal sup­port and in­fra­struc­ture de­vel­op­ment. En­hance ease of do­ing busi­ness through dereg­u­la­tion, sim­pli­fied pro­ce­dures and e-gov­er­nance. RE­GIONAL CON­NEC­TIV­ITY SCHEME. One of the high points of the pol­icy is the em­pha­sis on re­gional con­nec­tiv­ity. No other gov­ern­ment has spelt out such elab­o­rate plans of net­work­ing In­dia. The Re­gional Con­nec­tiv­ity Scheme (RCS) is to come into ef­fect in the sec­ond quar­ter of 2016-17 and the key fea­ture is cap on air­fare – ` 2,500 for a one-hour flight. This will be im­ple­mented by way of: Re­vival of airstrips/air­ports as no-frills air­ports at an in­dica­tive cost of ` 50 crore to ` 100 crore. De­mand-driven se­lec­tion of air­ports/airstrips for re­vival in con­sul­ta­tion with state gov­ern­ments and air­lines. Vi­a­bil­ity Gap Fund­ing (VGF) for air­line op­er­a­tors. RCS only in those states which re­duce VAT on ATF to one per cent or less, pro­vide other sup­port ser­vices and 20 per cent of VGF. The pol­icy stip­u­lates con­ces­sions that will be pro­vided by the stake­hold­ers and they in­clude: There will be no air­port charges. Re­duced ser­vice tax on tick­ets on 10 per cent of the tax­able value for one year ini­tially. Re­duced ex­cise duty at two per cent on ATF picked at RCS air­ports. State gov­ern­ment will pro­vide po­lice and fire ser­vices with­out charge and power, wa­ter and other util­i­ties at con­ces­sional rates. Cre­ation of Re­gional Con­nec­tiv­ity Fund for VGF through a levy of ` 8,000 per de­par­ture on all do­mes­tic flights other than Cat II/Cat IIA routes, RCS routes and small air­craft be­low 80 seats. VGF to be shared be­tween the Min­istry of Civil Avi­a­tion (MoCA) and state gov­ern­ments in the ra­tio of 80:20 and in the case of North-east­ern states, the ra­tio is 90:10. While the Union Gov­ern­ment has spelt out the pol­icy in clear terms, it is now up to the state gov­ern­ments to trans­form the pol­icy into ac­tion. Cur­rently, around 75 out of 450 airstrips/air­ports have sched­uled op­er­a­tions and re­vival of the re­main­ing airstrips and air­ports will be ‘de­mand-driven’. SCHED­ULED COM­MUTER AIR­LINES, NEW CAT­E­GORY. The pol­icy has cat­e­gorised com­mer­cial op­er­a­tions into three main cat­e­gories – Sched­uled Air Trans­port Op­er­a­tor (do­mes­tic and in­ter­na­tional); Sched­uled Com­muter Op­er­a­tor and Non-Sched­uled Op­er­a­tor. With re­gard to the first and the third cat­e­gories there are no changes in the ex­ist­ing pro­vi­sions.

With fo­cus on en­hanc­ing re­gional con­nec­tiv­ity, the pol­icy has in­tro­duced the cat­e­gory of Sched­uled Com­muter Op­er­a­tor that will op­er­ate air­craft hav­ing a max­i­mum All Up Weight ( AUW) not ex­ceed­ing 40 tonnes. The min­i­mum eq­uity cap­i­tal re­quire­ments would be on the ba­sis of num­ber and size of air­craft in the fleet. Com­muter op­er­a­tors will pre­dom­i­nantly pro­vide con­nec­tiv­ity on reg­u­lar ba­sis on do­mes­tic routes. There would be a pre­scribed min­i­mum num­ber of air­craft with such op­er­a­tors to main­tain the reg­u­lar­ity of op­er­a­tions. Op­er­a­tors whose prin­ci­pal busi­ness is to carry out com­muter op­er­a­tions, may ad­di­tion­ally carry out do­mes­tic char­ter op­er­a­tions pro­vided the sched­ule of op­er­a­tions of prin­ci­pal busi­ness is not af­fected. They would be per­mit­ted to have code­share with other air­lines, both do­mes­tic and in­ter­na­tional. ROUTE DIS­PER­SAL GUIDE­LINES. The route dis­per­sal guide­lines (RDG) which was in­tro­duced in 1994 to pro­vide air con­nec­tiv­ity to Jammu and Kash­mir, North East re­gion, An­daman & Ni­co­bar Is­lands, Lak­shad­weep, Tier-II and Tier-III ci­ties, by way of in­ter­nal cross-sub­sidy by air­lines us­ing their rev­enues on the trunk routes (12 in num­ber) has been ra­tio­nalised. Cat­e­gory I routes will be ra­tio­nalised once in five years, by adding more routes based on trans­par­ent cri­te­ria.

The cri­te­ria pro­posed for a Cat I route are it should have fly­ing dis­tance of more than 700 km, av­er­age seat fac­tor of more than 70 per cent and an­nual traf­fic of five lakh pas­sen­gers over two full sched­ules (i.e. sum­mer and win­ter).The traf­fic to be de­ployed on Cat II and IIA routes ex­pressed in terms of a per­cent­age of Cat I traf­fic will re­main the same. How­ever, routes to Ut­tarak­hand and Hi­machal Pradesh will be in­cluded in Cat­e­gory II. For Cat III routes, it is 35 per cent of Cat I traf­fic in view of the fact that RCS is be­ing im­ple­mented for a sim­i­lar pur­pose. For the pur­pose of meet­ing the RDG re­quire­ments, the Sched­uled Air­lines will be per­mit­ted to trade avail­able seat kilo­me­tres (ASKM) of he­li­copters and other small air­craft (max­i­mum AUW not ex­ceed­ing 40 tonnes) oper­at­ing un­der RCS to ex­tend the last-mile con­nec­tiv­ity seam­lessly to un­der­served or un­served ar­eas.

FI­NALLY 5/20 RULE GOES. The much talked about 5/20 rule has been mod­i­fied and now air­lines can com­mence in­ter­na­tional op­er­a­tions pro­vided that they de­ploy 20 air­craft or 20 per cent of to­tal ca­pac­ity (in term of av­er­age num­ber of seats on all de­par­tures put to­gether), which­ever is higher for do­mes­tic op­er­a­tions. The 5/20 rule was ap­proved by the gov­ern­ment in De­cem­ber 2004 to pro­tect na­tional car­rier Air In­dia. IndiGo, launched in 2006, had to wait till 2011 to com­mence op­er­a­tions on in­ter­na­tional routes and Spice­Jet had to wait till 2010 to do so. Hav­ing gone through the wait pe­riod, these air­lines were op­pos­ing the gov­ern­ment’s move to scrap the 5/20 rule. With the amend­ment, new air­lines can ven­ture into in­ter­na­tional skies. Vis­tara, set up in Jan­uary 2015, has 11 planes presently and plans to ex­pand its fleet to 20 by June 2018. AirAsia In­dia which be­gan op­er­a­tions in June 2014, op­er­ates eight air­craft and is keen to grow. BI­LAT­ERAL TRAF­FIC RIGHTS. In­dia has Air Ser­vice Agree­ments (ASA) with 109 coun­tries cov­er­ing as­pects re­lat­ing to the num­ber of flights, seats, land­ing points and code-share. The gov­ern­ment plans to lib­er­alise the regime of bi­lat­eral rights lead­ing to greater ease of do­ing busi­ness and wider choice to pas­sen­gers. The gov­ern­ment will en­ter into an ‘Open Sky’ ASA on a re­cip­ro­cal ba­sis with SAARC coun­tries and coun­tries with ter­ri­tory lo­cated en­tirely be­yond a 5,000-km ra­dius from New Delhi. Un­lim­ited flights above the ex­ist­ing bi­lat­eral rights will be al­lowed di­rectly to and from ma­jor in­ter­na­tional air­ports within the coun­try as no­ti­fied by the Min­istry from time to time. For coun­tries partly or fully within 5,000-km ra­dius, where the des­ig­nated car­ri­ers of In­dia have not fully utilised 80 per cent of their ca­pac­ity en­ti­tle­ments, but for­eign car­ri­ers/coun­tries have utilised their bi­lat­eral rights and are press­ing for in­crease in ca­pac­ity, a method will be rec­om­mended by a com­mit­tee headed by the Cabi­net Sec­re­tary for the al­lot­ment of the ad­di­tional ca­pac­ity en­ti­tle­ments. CODE-SHARE AGREE­MENTS. In­dian car­ri­ers will be free to en­ter into do­mes­tic code-share agree­ments with for­eign car­ri­ers to any point in In­dia avail­able un­der the re­spec­tive ASA. For the des­ig­nated In­dian car­ri­ers in­ter­na­tional code-share ar­range­ments with for­eign car­ri­ers will be lib­er­alised and no prior ap­proval from MoCA will be re­quired. FIS­CAL SUP­PORT. To pro­vide fis­cal sup­port to MRO fa­cil­i­ties, ground han­dling, cargo and ATF in­fra­struc­ture col­lo­cated at an air­port, (in­clud­ing he­li­port) are cov­ered un­der the ‘ Har­monised List of In­fra­struc­ture, and will get the ben­e­fit of ‘in­fra­struc­ture’ sec­tor. AIR­PORTS DE­VEL­OP­MENT. The Min­istry will con­tinue to en­cour­age de­vel­op­ment of air­ports by the state gov­ern­ments or the pri­vate sec­tor or in pub­lic-pri­vate part­ner­ship (PPP) mode. To en­sure uni­for­mity and level play­ing field across var­i­ous op­er­a­tors, fu­ture tar­iffs at all air­ports will be cal­cu­lated on a ‘ hy­brid till’ ba­sis un­less other­wise spec­i­fied for any project be­ing bid out in fu­ture. 30 per cent of non-aero­nau­ti­cal rev­enue will be used to cross-sub­sidise aero­nau­ti­cal charges. In fu­ture, con­ces­sions/ de­vel­op­ment of air­ports, it will be nec­es­sary to en­sure a min­i­mum level and stan­dard of cargo fa­cil­ity at the air­port. AIR­PORTS AU­THOR­ITY OF IN­DIA. Out of 125 air­ports of AAI, about 95 are oper­a­tional of which 71 have sched­uled com­mer­cial op­er­a­tions as of Jan­uary 1, 2016. AAI will take up de­vel­op­ment of green­field or brown­field air­ports sub­ject to: Project should be fi­nan­cially vi­able with non-zero IRR, ex­cept for no-frills air­ports de­vel­oped un­der RCS. State/Cen­tral Gov­ern­ment will pro­vide VGF to AAI if the project is strate­gi­cally im­por­tant but fi­nan­cially un­vi­able. Land will be pro­vided free of cost and free from all en­cum­brances by state gov­ern­ment with­out treat­ing it as eq­uity. Land will in­clude suf­fi­cient space on city side for com­mer­cial use as per ap­pli­ca­ble law. FO­CUS ON HE­LI­COPTERS. In­dia cur­rently has less than 300 civil­ian he­li­copters which is very low as com­pared to other de­vel­op­ing na­tions. In or­der to boost he­li­copter de­ploy­ment, the DGCA will be for­mu­lat­ing sep­a­rate reg­u­la­tions for he­li­copters. The gov­ern­ment will fa­cil­i­tate the de­vel­op­ment of at least four heli hubs ini­tially. The DGCA will bring out reg­u­la­tions ex­clu­sively for hos­pi­tal emer­gency med­i­cal ser­vices (HEMS) wherein these he­li­copters will not re­quire any oper­a­tional clear­ance, in­clud­ing land­ing at ac­ci­dent and emer­gency sites from any agency ex­cept Air De­fence clear­ance. There will be no land­ing charges and RNFC for HEMS op­er­a­tions.

Im­por­tantly, he­li­copters will be free to fly from point-to-point with­out prior ATC clear­ance in airspace be­low 5,000 feet and out­side con­trolled airspace, pro­hib­ited and re­stricted ones, Tem­po­rary Seg­re­gated Ar­eas (TSAs) and Tem­po­rary Re­stricted Ar­eas (TRAs) af­ter ob­tain­ing the Air De­fence clear­ance. CRE­AT­ING MRO HUB? The MRO busi­ness of In­dian car­ri­ers is around 5,000 crore, 90 per cent of which is cur­rently spent out­side In­dia – in Sri Lanka, Sin­ga­pore, Malaysia, UAE, etc. The gov­ern­ment is keen to de­velop In­dia as an MRO hub in Asia, at­tract­ing busi­ness from for­eign air­lines. In the union bud­get the fol­low­ing pro­vi­sions were made: The tools and tool­kits used by the MRO have been ex­empted from cus­toms duty. MROs were re­quired to pro­vide proof of their re­quire­ments of parts or or­ders from their client air­lines. The process for the clear­ance of the parts has been brought in line with that of the tool­kits for a one-time cer­ti­fi­ca­tion by DGCA ap­proved Qual­ity Man­agers in MROs. To en­able economies of scale, the re­stric­tion of one year for util­i­sa­tion of duty free parts has been ex­tended to three years. To al­low im­port of un­ser­vice­able parts in­clud­ing air­craft com­po­nents like en­gines and land­ing gears by MROs for pro­vid­ing ex­change/ad­vance ex­change, the no­ti­fi­ca­tion has been re­vised to en­able ad­vance ex­port of ser­vice­able parts. For­eign air­craft brought to In­dia for MRO work will be al­lowed to stay for the en­tire pe­riod of main­te­nance or up to six months, which­ever is lesser, pro­vided it un­der­takes no com­mer­cial flights dur­ing the stay pe­riod. The air­craft may, how­ever, carry pas­sen­gers in the flights at the be­gin­ning and end of the stay pe­riod in In­dia.

WHILE THE UNION GOV­ERN­MENT HAS SPELT OUT THE POL­ICY IN CLEAR TERMS, IT IS NOW UP TO THE STATE GOV­ERN­MENTS TO TRANS­FORM THE POL­ICY INTO AC­TION

To give fil­lip to MRO sec­tor, the Min­istry said it would per­suade state gov­ern­ments to make VAT zero-rated on MRO ac­tiv­i­ties. In fu­ture air­port/he­li­port projects, pro­vi­sion would be made for ad­e­quate land for MRO ser­vice providers and also for air cargo op­er­a­tions. Air­port roy­alty and ad­di­tional charges will not be levied on MRO ser­vice providers for a pe­riod of five years from the date of ap­proval of the pol­icy. GROUND HAN­DLING. The air­port op­er­a­tor will en­sure that there will be three Ground Han­dling Agen­cies (GHA) in­clud­ing Air In­dia’s sub­sidiary/JV at all ma­jor air­ports as de­fined in AERA Act of 2008 to en­sure fair com­pe­ti­tion. Non-ma­jor air­ports are ex­empted from min­i­mum num­ber of ground han­dlers. All do­mes­tic sched­uled air­line op­er­a­tors in­clud­ing he­li­copter op­er­a­tors will be free to carry out self-han­dling at all air­ports BOOST­ING AIR CARGO. Cur­rently, air cargo vol­umes in In­dia are very low as com­pared to other lead­ing coun­tries due to high charges and high turn­around time. Within the air cargo ecosys­tem, Ex­press De­liv­ery Ser­vices (EDS) has a dis­tinct oper- ational na­ture and is be­com­ing piv­otal es­pe­cially in the light of dou­ble-digit growth in e-com­merce.

An Air Cargo Lo­gis­tics Pro­mo­tion Board (ACLPB) has been con­sti­tuted to pro­mote growth in air cargo by way of cost re­duc­tion, ef­fi­ciency im­prove­ment and bet­ter in­ter-min­is­te­rial co­or­di­na­tion. The Board and the in­dus­try will sub­mit a de­tailed ac­tion plan, with the ob­jec­tive of re­duc­ing dwell time of air cargo from ‘air­craft to truck’ to be­low 48 hours by De­cem­ber 31, 2016, and to 24 hours by De­cem­ber 31, 2017, by re­duc­tion in free time and other mea­sures. For ex­ports, dwell time will be re­duced to 12 hours by De­cem­ber 31, 2016, and eight hours by De­cem­ber 31, 2017. SKILL DE­VEL­OP­MENT IN AVI­A­TION. The growth of civil avi­a­tion in the coun­try has been ham­strung by the short­age of ap­pro­pri­ate skills re­quired in dif­fer­ent sec­tors of civil avi­a­tion. Ac­cord­ing to cer­tain es­ti­mates, the in­cre­men­tal hu­man re­source re­quire­ment of the civil avi­a­tion sec­tor by 2025 would be in the re­gion of 3.3 lakh. The gov­ern­ment will cre­ate the nec­es­sary ecosys­tem and ar­chi­tec­ture for en­sur­ing full util­i­sa­tion of the skill de­vel­op­ment ca­pac­i­ties.

Af­ter ob­tain­ing a com­mer­cial pi­lot li­cence (CPL), it is nec­es­sary to get type-rated to get em­ploy­ment in an air­line. This puts an enor­mous fi­nan­cial bur­den on the pi­lot hav­ing CPL as type­r­at­ing costs can be of the or­der of ` 25-30 lakh. There are nearly 8,000 pi­lots hold­ing CPL but are un­em­ployed. There are plans to de­velop a scheme for pro­vid­ing fi­nan­cial sup­port for type-rat­ing of pi­lots. The de­tailed scheme will be worked out sep­a­rately ei­ther by set­ting up the fa­cil­ity at the Indira Gandhi Rashtriya Udaan Academy or Air In­dia or in PPP mode.

It is truly a com­pre­hen­sive pol­icy which the gov­ern­ment has as­sid­u­ously for­mu­lated and it is now for the in­dus­try and the sate gov­ern­ments to get their act to­gether. Not to men­tion the bu­reau­cracy which has to get out of its in­er­tia and help ac­cel­er­ate de­vel­op­ment. GIV­ING WINGS TO AVI­A­TION DREAMS. Ku­dos to the gov­ern­ment for an ex­haus­tive Na­tional Civil Avi­a­tion Pol­icy 2016. It cov­ers the en­tire gamut of civil avi­a­tion and is ex­pected to cat­a­pult the sec­tor to as­tound­ing heights, pro­vided the stake­hold­ers re­alise the in­tent of the gov­ern­ment – to give wings to avi­a­tion dreams.

It goes to the credit of the Naren­dra Modi Gov­ern­ment to give def­i­nite di­rec­tion to net­work­ing In­dia. One of the point­ers of the gov­ern­ment’s in­tent ‘ Sabka Saath, Sabka Vikas’ (To­gether with all, De­vel­op­ment for all) can be seen in the NCAP which lays em­pha­sis on re­gional and re­mote area con­nec­tiv­ity. An­nounc­ing a slew of in­cen­tives for op­er­a­tors fly­ing into un­served and un­der­served des­ti­na­tions, the gov­ern­ment is play­ing a cat­alytic role. The in­tro­duc­tion of the Sched­uled Com­muter Air­line cat­e­gory has to be seen in this per­spec­tive and it is now for the in­dus­try to take the bite.

The cap on air fares, along with en­hanced re­gional con­nec­tiv­ity, will bring in new pas­sen­gers to the air­line in­dus­try, which is ex­pected to give sub­stan­tial trac­tion to eco­nomic growth. Re­cently, the Min­istry also an­nounced a slew of mea­sures to pro­tect the trav­el­ling pub­lic and it is hoped that the air­line in­dus­try ac­knowl­edges that a ‘ happy cus­tomer’ trans­lates into a ‘ healthy air­line’. In­dian avi­a­tion is gain­ing al­ti­tude and speed to be­come one of the top three avi­a­tion mar­kets in the world soon!

THE MIN­ISTRY WILL CON­TINUE TO EN­COUR­AGE DE­VEL­OP­MENT OF AIR­PORTS BY THE STATE GOV­ERN­MENTS OR THE PRI­VATE SEC­TOR OR IN PPP MODE

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