It’s not quite what the Left would have ordered but the Union civil aviation ministry has finalised a new government policy which is market-friendly and will open up the booming aviation sector.
And it is bound to further widen fissures between the government and the Left. The first-ever civil aviation policy—which has been in the making for the last six years—awaits Cabinet clearance before coming into force within this month. The policy document, accessed byOutlook, spells out the government guidelines on a wide range of issues, including equity participation of foreign airlines in Indian carriers and public-private participation in airport projects.
Fully aware of objections from the Left, civil aviation minister Praful Patel has tried to introduce some safeguards, particularly on the controversial issue ofFDI in domestic carriers. The policy, for the first time, allows equity participation by foreign airlines up to 49 per cent. But this will be allowed only after the industry is "stronger". The criteria for stronger being: when the domestic airlines all put together own at least 1,000 aircrafts. At present, they own only 250, of which half are accounted for by Indian and Air India. The policy is clear:FDI by foreign airlines will be allowed only after being passed by the Foreign Investment Promotion Board. ButFDIbeing a sensitive issue with the Left parties, the comrades will not be reassured only by such precautionary clauses in the new policy.
However, there is no going back on restructuring and modernisation of the four metro airports. The policy makes it clear that Calcutta and Chennai airports will follow the same joint venture (JV) route of public-private participation as the Delhi and Mumbai airports. This would mean 74 per cent private equity, of which 49 per cent is capped forFDIand the rest for Indian companies. The remaining 26 per cent stake will be held by the Airports Authority of India (AAI). TheAAI would be in charge of the entire aeronautical aspect of development which include the runway, air traffic control and handling of aircraft movement. The non-aeronautical development has been left to the JV partners.
The task of modernisation of 35 smaller airports has been given to the AAI. In the first phase, it will have to complete work on 10 of the airports by ’07 and the remaining by ’08. Greenfield airport projects are already under way near Bangalore and Hyderabad with 74 per cent private-public participation and 26 per cent share held by the state government andAAI.
With private and regional airlines mushrooming (there are as many as 14 airlines already), the policy raises the stakes so that only those entrepreneurs who can run an airline in a stable manner will enter the market. The minimum equity required to start a new airline has been raised from Rs 30 to Rs 50 crore. The new policy encourages regional airlines to increase connectivity between non-metros and metros. For this, incentives like waiving of landing/parking charges for five years after commencement of operations will be offered.
The new policy will replace the existing model of route dispersal guidelines with a subsidy-based system. As per the route dispersal guidelines, carriers are forced to operate in "the backward and remote region of the Northeast". They are supposed to operate at least 10 per cent of the flights on the trunk routes in the Northeast. Operators on these economically less viable sectors will instead be offered subsidies like lower usage charges and other concessions.
Flight safety being of prime importance, the Directorate General of Civil Aviation (DGCA) will be strengthened. Some of the major recommendations made by the M.K. Kaw committee, (instituted in ’05 which recently submitted its report) have also been incorporated into the policy. TheDGCA will be entrusted with the enforcement of environmental protection laws and other such related legislative obligations. Its functions will be expanded to include various aspects of aerodrome licensing, surveillance and certification of communication and navigational systems, air traffic management facilities and licensing of the Air Traffic Controlling officers. The procedures for clearing flight schedules, licensing of airlines and personnel will also be rationalised as some of them have become redundant and outdated.
The new policy also stipulates an upper limit for the age of an aircraft for import or lease. At present, an aircraft more than 15 years old cannot be imported or leased. The upper limit under the new policy is eight years. This is to improve safety standards. Issues of security are bound to become dominant in an increasingly liberalised environment. For this, the Bureau of Civil Aviation Security will be given more teeth and special provisions made to tackle aviation offences, which at present are dealt under the Indian Penal Code.
Complementary to the new aviation policy is the proposed Aviation Economic Regulatory Act (AERA). While the policy will be put to the Cabinet, theAERA will be placed before the Parliament. The AERA will formulate guidelines for mega mergers like those of Air India-Indian, and Jet and Sahara. In addition to dealing with mergers and acquisitions, it will also lay down guidelines for sharing of airport space and parking bays. It will lay down rules for providing a level playing field to various operators including smaller airlines and private operators. It will also regulate tariffs and concessional agreements.
According to Patel, the next decade belongs to aviation industry. To this end, the new policy and the act aims to increase air connectivity, give a fillip to tourism, specially domestic tourism, and make air transport affordable. What’s better than a high-flying aamaadmi?
