Govt Set to Tweak 5/20 Norm for Airlines
Move, a boost for new airlines, will see govt doing away with condition of flying 5 yrs on domestic routes, but 20-aircraft fleet requirement to stay
New Delhi: The rules for local airlines to fly overseas, a highly contested policy issue within the industry, are set to change with the government ready to abolish one of the current eligibility conditions while keeping the other.
The condition of flying on domestic routes for five years for an overseas permit doesn’t feature in a note circulated by the civil aviation ministry for interministerial consultations on Friday. But it keeps the requirement of a minimum fleet of 20 aircraft. There is an addition as well: every airline will have to maintain 20% of the total capacity in the domestic sector all the time.
This is likely to be the final policy because ministers have already met and informally approved it. “We have the consent of all these ministers and ministries and the cabinet approval should come by the end of this month,” said a senior aviation ministry official, who did not want to be named. To become effective, it still has to get the formal approval of ministries. The Prime Minister has been in favour of changing the current rule, known as 5/20.
ET had first reported on the likely new formula last month. The ministry had earlier issued a draft policy for the sector, which had given various suggestions to replace the 5/20 rule along with other recommendations.
Vistara and AirAsia India, launched in 2015 and 2014, respectively, will be the immediate beneficiaries of this change as they can fly international before completing five years on local routes. The two, however, will have to increase their fleet size from nine and six aircraft at present to 20 aircraft to qualify.
An analyst said bringing in new rule would defeat the purpose of complete liberalisation.
“0/20 and 20% capacity deployment on domestic is not a progressive reform and defeats the purpose of liberalisation. Especially, adding 20% capacity deployment on domestic is a big negative,” said Kapil Kaul, chief executive of consultancy firm Centre for Asia pacific Aviation in India.
Other proposals in the note circulated on Friday include offering concessions such as a flat 2% excise duty on fuel at regional airports for three years and 1.4% service tax on regional flights for one year.
Excise duty on aviation fuel is 14% today, while airlines have to pay a 5.6% service tax on tickets.
It proposes to scrap the plan to charge 2% cess on fuel and replace it by charging .₹ 8,000 per landing/take off on domestic flights by planes with 80 or more seats. “This is estimated to generate about .₹ 500 crore annually to subsidise the cost of regional flights in the country,” said a government official.
He said the other details in the final policy were more or less same as the draft policy. Kaul said structural and institutional challenges, such as reforms at the industry regulator, long-term airport capacity planning, removing negative fiscal regime, future of Air India and Airports Authority of India and, more importantly, developing capabilities within the aviation ministry to ensure implementation weren’t addressed. “The aviation ministry has totally avoided core and critical issues for reasons best known to them,” he said.