RE­GIONAL CON­NEC­TIV­ITY: UDAN LAUNCHED

The pri­mary ob­jec­tive of RCS is to fa­cil­i­tate/stim­u­late re­gional air con­nec­tiv­ity by mak­ing it af­ford­able

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

THE IN­DIAN CIVIL AVI­A­TION land­scape is in the process of ma­jor trans­for­ma­tion and the Min­istry of Civil Avi­a­tion took an­other gi­ant leap to­wards that — by launch­ing the Re­gional Con­nec­tiv­ity Scheme un­der the name of ‘UDAN’ which means flight. UDAN seeks to get more peo­ple to fly from smaller towns and cities, from un­served and un­der­served ar­eas to the met­ros, con­nect­ing In­dia like never be­fore. Launch­ing UDAN, the Min­is­ter of Civil Avi­a­tion, P. Ashok Ga­jap­athi Raju, said: “We will tar­get the first flights un­der UDAN to take off by Jan­uary 2017.” The crux of the scheme is to make fly- ing ac­ces­si­ble and af­ford­able to the vast ma­jor­ity of peo­ple liv­ing in the hin­ter­land. UDAN is also an acro­nym in Hindi ‘ Ude Desh ka Aam Naa­grik’ (the com­mon man of the coun­try will fly).

Echo­ing this view, the Min­is­ter of State Jayant Sinha said the scheme is “to get those wear­ing hawai chap­pals on to an air­craft. We have tried to make costs of fly­ing lower to serve un­der­served and other routes.” UDAN is said to be the first of its kind glob­ally wherein it would jump­start the re­gional avi­a­tion seg­ment in In­dia. “We are very hope­ful of a pos­i­tive re­sponse from the in­dus­try but our think­ing is that with the scheme, we will in fact be jump-start­ing re­gional avi­a­tion,” Sinha said while ex­ud­ing

con­fi­dence that the scheme would be “quite at­trac­tive” for con­sumers, car­ri­ers, small and re­gional air­lines, lessors and other play­ers in the ecosys­tem. The gov­ern­ment would cre­ate a new cat­e­gory of sched­uled com­muter op­er­a­tors to en­able peo­ple to en­ter and get started in the re­gional space, he added.

The Civil Avi­a­tion Min­is­ter tweeted “Growth rates in civil avi­a­tion en­cour­ag­ing; in­tend to keep the mo­men­tum.” RCS is one of the key el­e­ments of NCAP 2016, which en­vi­sions do­mes­tic tick­et­ing of 30 crores by 2022 and 50 crores by 2027. RCS as well as NCAP 2016 would even­tu­ally pro­mote growth of the en­tire civil avi­a­tion sec­tor. The ob­jec­tives, he said, were to Af­ford­abil­ity — take fly­ing to the masses. Con­nec­tiv­ity — re­vive more than 50 un­der­served and un­served air­ports in small and medium cities. Growth — to pro­mote tourism, en­cour­age bal­anced growth and in­crease em­ploy­ment op­por­tu­ni­ties in the hin­ter­land. The Civil Avi­a­tion Sec­re­tary R.N. Choubey said that it was un­for­tu­nate that in a coun­try of 1.3 bil­lion peo­ple do­mes­tic tick­et­ing stands at 80 mil­lion. “We hope to have flights to 50 more air­ports in the next four years through the Re­gional Con­nec­tiv­ity Scheme. Un­der the scheme, air­lines will have com­plete free­dom to en­ter into code­shar­ing with larger air­lines for con­nec­tiv­ity.” Also, re­gional con­nec­tiv­ity flights will be ex­empted from var­i­ous air­port charges. Air­lines will get ex­clu­sive rights for three years to fly on a par­tic­u­lar re­gional route. Air­fares will be capped at 2,500 for an hour’s flight for re­gional flights un­der the scheme. “We want to make sure en­try and exit bar­ri­ers are kept rea­son­ably low. Air­line can with­draw from the scheme af­ter one year,” the Avi­a­tion Sec­re­tary said. VI­A­BIL­ITY GAP FUND­ING. Choubey said Vi­a­bil­ity Gap Fund­ing (VGF) will be pro­vided to air­lines for three years un­der the UDAN scheme. The bid­ding for air­lines to get sub­sidy un­der the scheme will take place twice a year be­gin­ning to­day. The gov­ern­ment has ap­pointed MSTC Lim­ited to carry out re­v­erse auc­tion (air­lines ask­ing for low­est sub­sidy amount wins). “We don’t agree with air­lines’ op­po­si­tion to put a levy on them to fund the scheme,” ac­cord­ing to Choubey. The new levy on air­lines will be an­nounced by Oc­to­ber 31, he added. VGF will be pro­vided for RCS flights for a pe­riod of three years from the date of com­mence­ment of op­er­a­tions of such RCS flights (ten­ure of VGF sup­port).

It may be re­called that ear­lier this year the Min­istry of Civil Avi­a­tion had re­leased the Na­tional Civil Avi­a­tion Pol­icy (NCAP), 2016. One of the ob­jec­tives of NCAP 2016 is to “en­hance re­gional con­nec­tiv­ity through fis­cal sup­port and in­fra­struc­ture devel­op­ment.”

As per an ICAO study “Eco­nomic Ben­e­fits of Civil Avi­a­tion: Rip­ples of Pros­per­ity”, the out­put and em­ploy­ment mul­ti­pli­ers of avi­a­tion are 3.25 and 6.10 re­spec­tively. This im­plies that ev­ery 100 ru­pees spent on air trans­port con­trib­utes to 325 ru­pees worth of ben­e­fits, and ev­ery 100 di­rect jobs in air trans­port re­sult in 610 jobs in the econ­omy as a whole. In fact, the study at­tributes over 4.5 per cent of the global gross do­mes­tic prod­uct (GDP) to civil air trans­port.

As the In­dian econ­omy grows, con­sump­tion-led growth in pop­u­lated met­ros is ex­pected to spill over to hin­ter­land ar­eas. This is also ex­pected to be on ac­count of fac­tors of pro­duc­tion ( land, labour, etc.) be­com­ing costlier in the densely pop­u­lated metro cities. In this sce­nario, air con­nec­tiv­ity can pro­vide re­quired im­pe­tus to the eco­nomic growth of re­gional cen­tres (towns/cities). In this con­text, one of the key ob­jec­tives of NCAP 2016 is to “es­tab­lish an in­te­grated ecosys­tem which will lead to sig­nif­i­cant growth of civil avi­a­tion sec­tor, which in turn would pro­mote tourism, in­crease em­ploy­ment and lead to a bal­anced re­gional growth.” SCHEME OB­JEC­TIVE. The pri­mary ob­jec­tive of RCS is to fa­cil­i­tate/ stim­u­late re­gional air con­nec­tiv­ity by mak­ing it af­ford­able. Pro­mot­ing af­ford­abil­ity of re­gional air con­nec­tiv­ity is en­vi­sioned un­der RCS by sup­port­ing air­line op­er­a­tors through (1) con­ces­sions by Cen­tral Gov­ern­ment, state gov­ern­ments (ref­er­ence deemed to in­clude union ter­ri­to­ries as well, un­less ex­plic­itly spec­i­fied oth­er­wise) and air­port op­er­a­tors to re­duce the cost of air­line op­er­a­tions on re­gional routes / other sup­port mea­sures and (2) fi­nan­cial (Vi­a­bil­ity Gap Fund­ing) sup­port to

We will tar­get the first flights un­der UDAN to take off by Jan­uary 2017. — P. Ashok Ga­jap­athi Raju, Min­is­ter of Civil Avi­a­tion We are very hope­ful of a pos­i­tive re­sponse from the in­dus­try but our think­ing is that with the scheme, we will in fact be jump-start­ing re­gional avi­a­tion. — Jayant Sinha, Min­is­ter of State, MoCA So we looked at these vis­i­ble busi­ness mod­els around the world and we have done a very de­tailed cal­cu­la­tion with var­i­ous dif­fer­ent op­er­a­tors get­ting their ac­tual num­bers in In­dia as well as with OEMs, ex­perts and con­sul­tants. — R.N. Choubey, Sec­re­tary, Min­istry of Civil Avi­a­tion

meet the gap, if any, be­tween the cost of air­line op­er­a­tions and ex­pected rev­enues on such routes. STATE GOV­ERN­MENT CON­CES­SIONS. The state gov­ern­ments’ buy-in and sup­port to de­ter­mine el­i­gi­bil­ity: To min­imise the cost of op­er­a­tions for air trans­port op­er­a­tors to the ex­tent pos­si­ble through con­ces­sions from state gov­ern­ments. OP­ER­A­TIONAL ONLY IN STATES WHICH SUP­PORT. RCS is ac­cord­ingly to be made op­er­a­tional only in states and at air­ports / he­li­pads (ir­re­spec­tive of own­er­ship by AAI / state gov­ern­ments / pri­vate en­ti­ties / Min­istry of De­fence) which demon­strate their com­mit­ment and sup­port to re­gional air trans­port op­er­a­tions by pro­vid­ing con­ces­sions / sup­port as re­quired un­der the scheme.

The RCS has listed out the con­ces­sions / sup­port that need to be of­fered by the re­spec­tive state gov­ern­ments at RCS air­ports within their states: Re­duc­tion of VAT to 1 per cent or less on avi­a­tion tur­bine fuel (ATF) at RCS air­ports lo­cated within the state for a pe­riod of ten years from the date of no­ti­fi­ca­tion of this Scheme. Upon tran­si­tion to the goods and ser­vices tax (GST), rates will be ap­pli­ca­ble as de­ter­mined un­der GST and ex­emp­tions / con­ces­sions shall be given as per­mis­si­ble so that such a re­duced level of tax­a­tion could ide­ally be con­tin­ued. Co­or­di­nat­ing with oil mar­ket­ing com­pa­nies for pro­vi­sion of fu­elling in­fra­struc­ture on best ef­fort ba­sis. Pro­vi­sion of min­i­mum land, if re­quired, free of cost and free from all en­cum­brances for devel­op­ment of RCS air­ports and also pro­vide multi-modal hin­ter­land con­nec­tiv­ity (road, rail, metro, wa­ter­ways, etc.) as re­quired. Pro­vi­sion of se­cu­rity and fire ser­vices free of cost at RCS air­ports through ap­pro­pri­ately trained per­son­nel and ap­pro­pri­ate equip­ment as per ap­pli­ca­ble stan­dards and guide­lines by rel­e­vant agen­cies. Pro­vi­sion of, di­rectly or through ap­pro­pri­ate means, elec­tric­ity, wa­ter and other util­ity ser­vices at sub­stan­tially con­ces­sional rates at RCS air­ports. Pro­vi­sion of a cer­tain share (20 per cent) to­wards VGF for re­spec­tive RCS routes (per­tain­ing to the state), pro­vided the share of states in the north-east­ern re­gion of In­dia and union ter­ri­to­ries would be (10 per cent). Con­ces­sions to of­fered by the air­port op­er­a­tors: Air­port op­er­a­tors (whether un­der the own­er­ship of the AAI, state gov­ern­ments, pri­vate en­ti­ties or the Min­istry of De­fence) shall not levy land­ing charges and park­ing charges or any other charge sub­sum­ing a charge for such as­pects in fu­ture on RCS flights. Se­lected air­line op­er­a­tors shall be al­lowed to un­der­take ground han­dling for their RCS flights at all air­ports. AAI shall not levy any ter­mi­nal nav­i­ga­tion land­ing charges (TNLC) on RCS flights. Route nav­i­ga­tion and fa­cil­i­ta­tion charges (RNFC) will be levied by AAI on a dis­counted ba­sis @ 42.50 per cent of nor­mal rates on RCS flights. Nor­mal rates re­fer to ap­pli­ca­ble rates spec­i­fied by the AAI on its web­site from time to time with­out any dis­counts or con­ces­sions. As pro­vided for in NCAP 2016, air freighter op­er­a­tions at RCS air­ports shall be en­ti­tled to the fol­low­ing un­der the Scheme for a pe­riod of up to 10 years from the date of no­ti­fi­ca­tion of this scheme. The ex­cise duty at the rate of 2 per cent shall be levied on ATF drawn for air freighter op­er­a­tions at RCS air­ports for a pe­riod of three years from the date of no­ti­fi­ca­tion of this scheme. Upon tran­si­tion to GST, rates will be ap­pli­ca­ble as de­ter­mined un­der GST and ex­emp­tions/ con­ces­sions shall be given as page 12 of 46 per­mis­si­ble so that such a re­duced level of tax­a­tion could ide­ally be con­tin­ued. There are other con­ces­sions too but VGF sup­port shall not be pro­vided for cargo op­er­a­tions.

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