Draft of new Indian Civil Aviation Policy
The Indian Ministry of Civil Aviation released the draft of its new policy on 30 October with various schemes which would liberalise bilateral rights and allow India to enter reciprocal agreements with South Asian nations and other countries beyond 5,000 km. This will result in unlimited flights to and from Europe and the SAARC (South Asian Association for Regional Cooperation).
While proposing to liberalise rules that allow foreign airlines to enter India, the draft has kept options open on the controversial 5/20 policy. Fledgling airlines like Vistara and AirAsia have been seeking abolition of this rule, which prevents domestic airlines from flying abroad before they have completed five years of operations and own 20 aircraft. Vistara chief executive Phee Teik Yeoh stated, “The 5/20 policy has to be abolished without condition, as it is detrimental to the interests of Indian carriers. India is the only country that penalises its own carriers. Dubai airport alone handles 150 airlines. Dubai’s gain is India’s loss.”
The draft proposals seek to improve regional connectivity, bring down fares for short-haul flights and facilitate higher foreign investment. The government has also drawn up plans to boost air cargo, maintenance, repair and overhaul activities through tax incentives and favourable policies. However, there are major issues which the policy does not address such as the future of Air India. “We would have liked to have seen more emphasis on addressing the negative fiscal environment airlines face, like sales tax on jet fuel, service tax on fares, airport charges, and withholding tax on aircraft leases. There is no reference to the future of Air India. The government’s ownership of the national carrier negatively influences policy decisions and has cost Indian taxpayers billions of dollars,” observed Kapil Kaul of the Centre for Asia Pacific Aviation.
The government plans to revive 476 airstrips/airports in the country, of which 75 are in use. No-frills airports would be built at a cost of Rs 50 crore, depending on the demand in the sector. Scheduled commuter airlines would get viability gap funding (VGF), which would be indexed to jet fuel prices and inflation. The VGF would be shared by the centre and states in 80:20 ratios.