COMMENTS ON THE NEW CIVIL AVIATION POLICY

The new Aviation Policy has been cleared by the Cabinet a couple of days back. It’s a welcome change after living with the draft policy for the last decade or so. The 5/20 rule controversy has been resolved as the period of five year wait has been done away with while retaining requirement of 20 aircrafts by an airline before they fly abroad. Also the requirement of 20% of total capacity of an airline to be kept for domestic aviation has been introduced to ensure that domestic connectivity is not sacrificed as was contended by one group of airline.

The fact that the domestic aviation is not as profitable as international has been accepted and to that extent there is a need for introspection by the Ministry.

Another major aspect of the new policy is laying down a policy for Regional Connectivity Scheme (RCS) for unserved airports which is excellent. This will be the basis of an aviation infrastructure for the country. This involves keeping ticket price for regional aviation of one hour flight at Rs.2500/-  for un-served airports under RCS. Along with this is opening of another reportedly about 50 remote unserved airports.In order to meet the likely loss due to fixing of ticket price for remote connectivity it has been proposed to provide Viability Gap Funding (VGF) by a small levy per departure on all major domestic routes. This will go a long way in making RCS at un-served airports viable. Such a policy will lead to economic development of remote regions through industrial growth and tourism. Many developed countries like USA, Canada, Finland have such schemes and its good that we are starting such a scheme now.

The existing Route Dispersal Guidelines (RDG) have been retained with some tweaking. RDG are meant to assist North-east, J&K and Island territories.Uttarakhand and Himachal have been added to this list which is good.

So we have now two subsidized schemes in the new civil aviation policy i.e. the RCS and RDG. While RCS will be subsidized by the government directly, RDG will be subsidized by Airlines. However, it is the passengers who will pay for both. Nevertheless, I consider this as a positive development as aviation is a catalyst to growth and remotes regions will get the incentive they deserve.The mechanism for RGD is already established. For RCS a new mechanism will need to be put in place.Normally this is done by reverse auction ie airlines are asked to bid for remote routes and the one asking for the lowest subsidy gets it. If it is ensured that frequency of flights to such remote airports under RCS is maintained throughout the year, the economics of the remote airport also becomes viable. Some state governments have already introduced such a scheme like Madhya Pradesh and Andaman and Nicobar Administration out of their own budget.

The other main feature of the new Aviation policy is with regard to bilateral rights for international routes in which the concept of open skies has been introduced for SAARC countries and countries beyond 5000 km for Delhi on reciprocal basis. This will ensure that while opening the skies internationally, Gulf countries and Singaporeare kept out. This is necessary as during UPAIIfar too many flying rights were given to Gulf, at the detriment of our airlines while retaining the policy of 5/20. This imbalance has been corrected in this policy with the hope that one or two of our airports could become an international hub like Dubai or Singapore. This is a good policy as it will give a major boost to inbound tourism along with improved visa policies (outbound tourism from India is already doing well).

Another major feature of this policy is giving a positive direction towards viability of MRO which has been an unnecessary negative drain on the country as airlines have been sending airlines abroad for major maintenance.

Apart from these the policy talks about improvement of Air Navigation Services which is an on-going process and modifying the policy of 150 kms regarding construction of new airports.

The policy falls short of replacing DGCA with an independent authority but promises to give DGCA more independence. The policy has projected that India will have 300 million domestic passengers by 2022 ie in 6 years. While the basis of this projection has not been given, there is no reason to doubt that India is poised for a major jump in domestic aviation if our current GDP growth of over 7% annually is maintained along with the policies of RDG and RCS.

SanatKaul is Chairman of International Foundation for Aviation, Aerospace and Development (India chapter)