India opens up skies for foreign carriers
Taking cognizance of the turbulent times, the Civil Aviation Ministry is undertaking steps to improve the situation such as making changes in aviation policies and approving over 400 flights by domestic carriers on international routes.
Apart from the economic slowdown, the aviation sector is suffering due to the cost of operation going high, especially with sales tax on ATF imposed by the State Governments, rising service tax going high and increasing airport charges. Ajit Singh, Civil Aviation Minister, Government of India talks about few challenges, issues and opportunities along with the changes in aviation policy in the Indian aviation sector.
Delhi will overtake Mumbai in aviation sector
According to Singh, Mumbai has a sales tax of 25 per cent while Delhi has 20 per cent on ATF. He says, “Airlines fueling up their aircraft at Delhi airport are double as compared to Mumbai. And pretty soon, Delhi will overtake Mumbai as far as civil aviation goes. So, if Mumbai airport reduces the tax, the revenue will increase and the difference in sales tax will be recovered with the demand from airlines.” Thus, the State Government should reduce sales tax on ATF which will not only help in inviting new airlines to start connections but also act as a revenue earner for the State Government.
Formulating new policies
“The aviation regulations and policies were formulated about 35 years ago when they were formed. Today, the scenario has completely changed and we are making changes in DGCA, AAI and even Air India. Many years ago, through ‘Open Skies’ policy, we invited inter- national carriers to operate in Indian skies.
During the beginning of this year, we have formulated a new bilateral policy where we are opening the world for other airlines in India besides Air India,” informed Singh.
“If Air India can’t make it, others can do it as they are also Indian carriers. We are making a lot of policy changes so that not only Air India but other Indian carriers can also benefit and start making profits,” updates Singh.
Performance standards set for AI
Singh says, “Our market share is only 18 per cent now and we keep losing money. Last year, we lost about
` 8,000 crore, in 2010 we lost about ` 6,000 crore. However, the cabinet has approved
` 30,000 crore to keep Air India in business. The amount will be paid over the period of eight years and every six months, we have set performance standards for Air India. If the airline fails to meet the performance standards, we don’t pay them.” This proves that the Government is not going to spend any more money on Air India.
AI is not the only player in the game now
Singh informed that through the recent changes in bilateral policies, all other Indian airlines can fly abroad and in last few months, we gave them about 400- 500 flights to neighbouring countries along with Europe and USA. The airline will take some time to start these connections but we have made the policy that they can fly abroad. Off course, Air India will get the priority when it comes to one or two flights but we are not going to wait for Air India forever.
Stronger air-connectivity
India has excellent airports like Mumbai, Hyderabad, Bengaluru, New Delhi and few more coming up. But then, there are Tier-II, Tier-III and Tier-IV cities where very few airlines operate. “Unless, we connect these destinations with metro cities of India, I don’t think tourism can meet its potential fully. Except few states like Kerala and Maharashtra, other states in India don’t have regional connectivity as the airports in smaller cities are not developed. Even if AAI has a small air-strip in smaller cities, there are hardly any airlines operating through those cities. Connectivity is a major issue and to tackle it, we are changing the policy that not only metro cities but also smaller airports will be open for PPP model. In next five years plan, we will spend ` 70,000 crore for making new airports across India,” concludes Singh.