Awaiting that Delayed Clearance For a Take-Off
With a new government, a bright new economic roadmap lies ahead. Aviation, a key driver of urbanisation and job creation, should be an important milestone on this roadmap. Passenger traffic has tripled in the last decade and is expected to triple again in the next decade from the current 160 million per year.
But such growth, in its current form, is not sustainable. The aviation policy framework has been largely unable to keep pace and many key constituents — airport operators, airlines, maintenance-repair-overhaul (MRO) operators — are making losses. A change in mindset, along with three broad themes, will allow the sector to take-off. The political psyche must shed the “luxury” connotation; aviation is now not only a commodity but a critical one that impacts many sectors.
India needs to create an environment that attracts global investment. The time is right: large equipment makers are introducing next-generation products and are looking for investments close to their customers. But India hasn’t projected itself as an alternative to established regional hubs. While we are giving billions in revenue to global original equipment manufacturers (OEMs), they are choosing countries like Singapore and UAE for investments.
A key problem lies in the ambiguous tax laws. For instance, thirdparty MROs have to deal with a slew of charges: airport royalties, customs duties, service tax on labour and value-added tax on spare parts. These offset lower labour costs and quicker turnaround times, making India 25% more expensive than foreign MROs. Airlines also face state fuel taxes of up to 30%, making fuel 15% more expensive for Indian carriers. Airport tariff is another area that needs rationalisation.
The rigid bureaucracy significantly extends implementation timelines and the risks involved. Whether it is inter-ministerial navigation, environmental clearances, access to land parcels or airport security and navigation restrictions, the list of hurdles is long. Regional airports — India needs to build or upgrade 200 to ensure country-wide coverage — have unacceptably long payback on investments due to these impediments. An empowered inter-ministerial working group providing single-window clearances needs to be looked at with more fervour. Areas such as cargo, MRO and general aviation, including rotorcraft, need attention. Helicopters are crucial in medical evacuations, disaster response, security, tourism, traffic control, and law and order. But the size of the helicopter fleet, tiny to begin with, has decreased in the last few years. Cities such as Sao Paulo have more helicopters than all of India. A comprehensive updated policy framework that addresses these deficiencies under a new Civil Aviation Authority with larger autonomy and flexibility is a must. While India adds tens of millions to the workforce and urban migration rises, fast-growing industries such as aviation face a significant talent gap. Incentivising private players to establish world-class centres for skill development will address the talent gap and enable India to develop hi-tech intellectual property. First, focus on generating high numbers of people with basic but quality training to address labour-intensive areas such as manufacturing, MRO and logistics. Second, raise competence at the high end to address critical design, processing and material technologies in aerospace. Statesponsored indigenous programmes such as the NCAD will help in developing an aviation ecosystem. The new government needs to view aviation strategically. At stake are more than one lakh hi-tech jobs, billions of dollars in taxes, and a strategic growth of technology and the manufacturing base that is the key to regional balancing. The decisiveness and speed of execution of the new regime will determine how quickly the sector takes-off.