The Centre’s draft civil aviation policy, that envisages “taking flying to the masses” and raising the number of air passengers from 70 million to 340 million by 2020, also making India an aircraft maintenance, repair and overhaul hub and introducing an “open skies” regime, was long overdue and was widely welcomed. There will, of course, be suggestions and some scepticism, and one hopes the government takes these ideas from the public and experts into consideration before finalising the policy by the yearend. Essentially, it will use the vast resources of precious land lying idle for decades, namely 475 civilian airstrips, many of World War II vintage, across India, of which only 75-90 are now in use.
India is a virgin market with just 350 aircraft catering to passengers whose numbers have risen with the advent of budget airlines like IndiGo, Go Air and SpiceJet. But they have been burdened by high taxes on aviation turbine fuel, airport handling and landing/parking charges. All these irritants are being rectified in the new policy with the cooperation of stakeholders like state governments and the Airports Authority of India by cutting taxes on fuel, reducing VAT and setting up a regional connectivity fund.
The RCF will partly be funded with Rs 1,500 crores raised by imposing a two per cent cess on air tickets. The Centre will also contribute 80 per cent and the states 20 per cent. The government will spend Rs 50 crores per airport that it revives and the losses by new airlines in selling tickets at Rs 2,500 for a one-hour journey and flying to uneconomic destinations will be subsidised by Viability Gap Funding.
Perhaps the most significant factor in this new policy, apart from putting a cap on fares at Rs 2,500 per hour and the “open skies” principle, is the MRO, which is a Rs 5,000-crore business. Ninety per cent of this business now goes to Colombo and Singapore due to the high taxes in India. Most of this can now be retained within the country, and this can also boost the “Make in India” programme.
While the commercial aspect is being tackled efficiently, the government will also have to pay attention to the safety angle. Interestingly, the Russian aircraft that crashed in Egypt on Saturday, killing all 224 people on board, was owned by one of the smaller airlines that mushroomed after the breakup of the Soviet Union. This should definitely raise a red flag. India’s record on safety has hardly been exemplary. In addition, the rule that mandated an airline must have a minimum of 20 aircraft and five years of operation before being allowed to fly overseas has to be done away with as it was introduced to favour certain private airlines.
