Spatial planning

Posted online: 2011-02-12

With a little under 70% of our population in rural areas, of which 60% is dependent on agriculture and the balance 10% on non-agriculture low-income non-farm activities depending on agriculture sector for their livelihood, and agricultural holdings becoming smaller and smaller due to fragmentation, land ceiling acts and family disputes, the average family holdings for most are becoming uneconomic and unviable. In 2002-03 (latest available), marginal holdings of less than one hectare were almost 70% of operational holdings in the country. Also, the average area per operational holding, which stood at 1.67 hectares in 1981-82, had declined to 1.06 hectares in 2002-03. The end result is that these uneconomic marginal holdings are being sold and resold in the market, and rural farm and non-farm employment is not able to keep pace with the ever-increasing rural unemployment, under-employment and disguised unemployment. These figures can only be worse now. An unhappy consequence is the undirected and unabated migration of rural populations to urban areas looking for work to make a living.

Since urban areas of all types (tier-1 to tier-3 cities) come under some sort of urban planning with municipalities and town areas and are generally out of reach of rural migrants, the end result is the mushrooming of urban slums. According to the most recent estimates available from the National Sample Survey for 2008-09, there were nearly 49,000 slums in urban India, 24% of these were located along nallahs and another 12% along railway lines, and, interestingly, 57% of these slums were built on public land mostly owned by local bodies and state governments. With the share of agriculture and allied sector, including forestry and logging, in the GDP declining from 70% to under 20% in the last 60 years, the natural corollary is high incidence of rural impoverishment and mass migration from rural to urban areas. Sadly, this has not been fully understood or even appreciated by our government economists and planners.

We have initiated two massive schemes for the welfare of urban and rural poor. The first one, notified in September 2007, focuses on provision of employment to the rural poor and is called the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), with a size of Rs 1,30,000 crore. According to newspaper reports, an estimated Rs 1.06 lakh crore has already been incurred on the scheme.

The other scheme, called the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), is perhaps the single-largest initiative of the government for planned development of our cities spread over seven years, from 2005-06 to 2012-13. The mission aims at improving the urban conditions with an outlay of Rs 66,000 crore to be implemented during 2005-12. Apart from 65 mission cities, provision is kept for other small towns. Together, these two schemes are worth Rs 2,00,000 crore.
MGNREGS offers employment to one person per rural family for 100 days in a year at Rs 100 per day (recently revised upwards). The condition is that the person has to work in a scheme in the same village which should help build infrastructure but mechanical implements are not allowed. While JNNURM focuses on urban improvement and emphasises capacity building and governance reforms. The subjects covered by JNNURM include slum improvement, heritage and metro/highway construction. But on completion of the mission period, the expected results are that urban local bodies and parastatal agencies will have achieved the following:

* Modern and transparent budgeting, accounting, financial management systems, designed and adopted for all urban service and governance functions
* City-wide framework for planning and governance will be established and become operational
* All urban residents will be able to access a basic level of urban services
* Financially self-sustaining agencies for urban governance and service delivery will be established, through reforms to major revenue instruments
* Local services and governance will be conducted in a manner that is transparent and accountable to citizens
* E-governance applications will be introduced in core functions of urban local bodies/parastatal.

JNNURM does not either talk of any transfer of population from rural to urban during the seven years of its life nor does it mention creating new areas for receiving fresh rural migrants or even new cities/SEZs. It, however, mentions rural-urban ratio shifting from 28% to 40% by 2021!

When these schemes are considered from the perspective of spatial planning, these two standalone schemes make little sense in the dynamic rural and urban scenario in the country. Indeed, many urban problems are due to the problems in the rural areas, since much of the migration of rural population to urban areas is due to extreme rural poverty and lack of employment opportunities. Given the rural-urban nexus, there is a clear case for these two large schemes to be conceived as complimentary schemes to make the shifting rural to urban scenario smooth without the hiccups of slums and squatters, which is due to poor planning of a dynamic shift of population due to shifting economic imperatives and the lack of foresight of our planning mechanism. Indeed, there exists considerable scope for fostering convergence between the two schemes through the urban infrastructure component of JNNURM. While the JNNURM accepts the rural-urban shift to 60-40% in a couple of years, it makes no plan for a smooth transition of the population.

—Sanat Kaul is a commentator and Devendra Gupta is consultant with NCAER

Strap your belts

Posted online: Fri Feb 24 2012.

Why so many airlines are reeling even as the domestic airline sector sees double-digit growth The dream run of the aviation sector is coming to a harsh end, not because of recession or lack of passengers, but mainly from two factors — the role of government, and predatory/ excessive pricing through computer reservation systems (CRS). As a result, we see the strange phenomenon of double-digit growth in the domestic sector and mounting losses in various airlines.

Kingfisher Airlines entered with a bang as a luxury airline that boasted high passenger amenities even in the economy class. It diverged from the up-and-coming low-cost carrier (LCC) model. As passengers turned to LCCs, amenities were forgotten. Micro-management by the owner, Vijay Mallya, led to unnecessary expenditure. Even when the haemorrhaging started, the airline insisted its business model was fine, and did not change course. It ran into cash flow issues and held back payments. While the government claims no concession or bailout will be given to private airlines, as it has done for Air India at the taxpayers’ expense, it has already bailed out Kingfisher by persuading public sector banks to convert the sticky debt into equity at over Rs 60 per share, while the current share price hovers around Rs 25. This amounts to a covert subsidy.

Be that as it may, we need to analyse the bigger issue of what ails the airline sector (the airport sector is the next on the block). The government is certainly to blame for high taxes. The cartelisation of air turbine fuel (ATF) prices by a few public sector oil companies through their opaque policy of imports coupled with absurdly high sales tax on ATF in Mumbai (note, not Maharashtra) and Delhi between 25 and 30 per cent is unheard of in other countries or even in some Indian states. If ATF becomes a “declared good” under Section 14 of the Central Sales Tax Act, then state governments cannot levy sales tax exceeding 4 per cent. But there is no consensus on this and states like Maharashtra and Delhi feel that since airlines cannot do without picking up fuel from these airports, why not squeeze them? While direct import of ATF by airlines is considered an alternative to avoid high sales taxes (already approved and notified), it is hardly a good alternative as ATF will need to be purchased in advance and stored at airports. It is also possible the cartelised oil companies will stop storing ATF at various airports that they do now.
The Air Navigation Service is also controlled by the government through the Airport Authority of India (AAI) as a monopoly provider. It is a major source of profit for AAI but has not invested in the latest equipment and training, leading to long delays as aircraft are at times made to hover for even an hour, burning fuel. The number of landings per hour in metro airports has not kept pace with the modern trends permitted by the International Civil Aviation Organisation, as a result, airlines suffer. Sometimes they do not get the appropriate height for cruising, adding to their costs. There is, however, no compensation for any deficiency in service. AAI, on the other hand, invests in airport modernisation, which is more visible.

The non-governmental problems of the airline industry are the result of intense competition. While the growth in domestic passenger traffic is in double digits, it is very price-sensitive. Like the telecom sector, ticket prices in general have come down over the last decade. This is, part from increased incomes, a major reason for the double-digit growth. In this context, the central reservation systems based on econometric modelling has introduced an element of irrationality in ticket pricing. The CRS is based on assumptions and unknowns that lead to the underpricing of tickets, below operating costs, when demand goes down. However, when demand goes up, prices go up excessively. For example, after Kingfisher’s cancellation of flights, ticket prices have gone up 30 to 40 per cent. Post liberalisation, all cost controls by the DGCA on ticket price have been given up, although under Section 135 of Aircraft Rules of 1937, the DGCA is obliged to control “predatory” pricing at one end and “excessive” pricing at the other end.

Adding to the problem is the size of the fleet. While some leased aircraft are returned, it is difficult to reduce or increase the size of fleet very much. So it becomes a financially sound practice to keep the fleet operational and fill it up as much as possible by dropping prices. Thereby hangs the tale of double-digit growth and high occupancy in flights, but a drop in profits, if not losses. Perhaps, we need an airline regulator to keep the competition healthy.

The writer is chairman of International Foundation of Aviation, Aerospace and Development, India chapter

Waste bedevils our skies

Posted online: 2011-12-21

Once upon a time, Indian airports were a monopoly under the Airports Authority of India. As a result of public outcry against their mismanagement, the government decided to take the Delhi and Mumbai metro airports out of the purview of AAI and privatise them. Similarly, new airports came up in Bangalore, Hyderabad and Cochin under the private sector. We now have world-class airport terminal buildings in New Delhi, Mumbai, Bangalore, Hyderabad and Cochin—where the public is more satisfied and AAI is enjoying better incentives by way of revenue share than it would have done otherwise.

We are now facing a similar situation in air traffic management. As a result of India’s economic growth and the liberalisation of our skies both domestically and internationally, there has been a tremendous increase in air traffic and aircraft movement (both at landing and take-off). Its main impact has been felt in the two premier airports of the country—Mumbai and New Delhi—and also our other metro airports, leading to long delays in aircraft landings due to congestion in the air. What has gone wrong? Why are aircraft made to wait in the air and circle over these airports for a long time before they are allowed to land? Why are airlines not given the requisite heights to cruise where they minimise their consumption? The
answer lies in our inadequate capacity to handle air traffic, which is the AAI’s mandate. And AAI has not improved in proportion to the increase in air movement, while the charges for the same have gone up. The reason given is that since runway capacity is still the same, we find it difficult to accommodate the increase in traffic movement in the air, especially in Mumbai (New Delhi now has two parallel runways).

What are the solutions to such a problem? Air traffic management methodology has undergone a sea change the world over. In many countries, new equipment and procedures have allowed the runways to double their capacity without increasing size, but not in our country. The International Civil Aviation Organisation, the international regulator, has approved new methods/procedures that enhance aircraft movement per hour from a single runway by installing new equipment such as ground radars. From a traditional 35 movements an hour, we can go up to 55 or even more if we follow this strategy. However, in India, while the growth in air traffic has been phenomenal, the air traffic management has not kept pace with leading technologies to reduce congestion in the sky.

The US is in the process of introducing ‘NextGen’ air traffic management and the Europeans have merged their sovereign skies into a single sky. India, with its single sky, still maintains four separate flight regions whose radars are not connected online. AAI does not have a computerised ‘air traffic flow management’ system, which is a mandatory requirement as per ICAO, when air traffic
demand is likely to reach the handling capacity of air traffic management. As a result of poor management, our air traffic remains under antiquated directions, leading to delays. We need to invest in air traffic management in our airports but our priorities get dictated by public perceptions of the visible aspect of aviation versus the invisible.

Does the air traffic management system not have full national coverage to ensure that flights do not unnecessarily hover around a metro airport at peak time? Are we not adding to wastage of fuel as well as adding to mounting losses of airlines? Is this not a national wastage? Does this not amount to deficiency in service? And this is not an interstate issue, as the sky above India is under a federal regime and the ministry of civil aviation (as well as AAI) is responsible for it.

Wastage caused by poor air traffic management does not only lead to extra costs for airlines but also a national wastage of imported ATF, as well as increasing environmental pollution—caused by airlines hovering over airports. In fact, AAI should not only be asked to compensate the airlines but should also be penalised for causing extra pollution, as they have not undertaken appropriate enhancements of technology and equipment. The airports regulator should take note.

What is now needed is a quick switch to a satellite-based navigation system, which not only allows better accuracy but also leads to much better aircraft management in the sky. We can make much more efficient use of our existing runways. While we have about 40 landings in an hour on each of our runways, with proper equipment and training of air controllers, this number can be doubled. The proposal to create a separate entity for air traffic management, divorced from AAI, is a good step that needs to be taken quickly to modernise our basic aviation infrastructure.
The author is chairman of International Foundation for Aviation, Aerospace and Development (India chapter)

Way out of aviation crisis: lower taxes, cheaper tickets

Posted online: 2009-08-04

The Federation of Indian Airlines threatened to go on strike for one day on August 18; it made headlines and upset many, including the government. The strike is off, and, yes, airlines are at fault, including for an attempt at cartel-like behaviour. But the government is at fault too.

India’s aviation industry, flying around 40 million domestic passengers a year, is still an infant industry when compared to railways which transports about 14 million passengers a day and bus transport which carries 90% of passengers, mainly over short distances. As the economy grows and incomes increase, the propensity to travel by air also grows. Air transport, no doubt, is a more efficient form of long distance transport. For efficient economic growth, aviation infrastructure including air connectivity at reasonable costs becomes as much a necessity as railways or road transportation. This realisation came in the early nineties when liberalisation of domestic airlines was carried out, followed by liberalisation of bilateral air service agreements, to allow more domestic and foreign airlines into the country. But air travel is still considered a luxury.

Central and state governments have found an easy way to enrich their coffers by putting very high taxes on petroleum products via both sales tax and aviation related charges. About two decades back, air travel was done mainly by government officers or corporate executives who were not price sensitive as their office paid for the bills. With economic growth, ordinary businessmen and people from all walks of life needed to travel by air also but were price sensitive. The sale price of aviation turbine fuel (ATF), sales tax on ATF, navigation and airport charges kept air travel expensive. With the coming of low cost carriers (LCC), full service carriers started to lose dominance. From about 30% of the market in 2007, they have reached 55% of air passenger traffic in Q1 of 2009, showing how price sensitive this sector has become. The global financial meltdown impacted the sector globally and Mumbai 26/11 impacted India’s inbound tourism in a big way.

Airlines the world over suffered, including domestic ones. They can recover only with increasing air traffic and cost cuttings by use of better technologies like e-ticketing and improved procedures. Airline seats are perishable like electricity. Unfortunately, some domestic airlines felt that by cartelisation and increasing prices, they would be able to increase their bottomline. This didn’t work We need to relook at the government’s fiscal policy on the aviation sector. Boxes on the right list sales tax on ATF across different states, varying from 4% in Andhra Pradesh to 30% in Maharashtra. They also list comparative airport charges between Singapore and Delhi. Further, they provide a comparison of ATF charges at Singapore and Mumbai stations.

With the kind of price sensitivity we have experienced in the case of LCC vs full service carriers, it appears that if taxes and charges are reduced and this is reflected in reduced ticket prices, the loss to government revenue will perhaps be more than compensated by increased traffic. Andhra Pradesh has already taken a step forward towards reducing sales tax on ATF to 4%. If other states also join in, especially the states with metro cities, this will have a major impact on passenger traffic. Further, if we compare the tax on a railway ticket or bus ticket with the tax on an air ticket, then the comparison becomes completely skewed.

—The writer is chairman, International Foundation for Aviation and Development(India chapter) and India’s former representative to ICAO

What ails our airlines

Posted online: 2011-11-30

There has been much talk in the media about our airlines losing money due to wrong government policies. On the one hand, we are having double digit growth in the sector and on the other, we find that all airlines are losing their profitability. The general mood is to blame the government for its policies. The blame is that, in the domestic sector, high ATF prices and high sales tax (going up to nearly 30% for Mumbai) are the main problems. However, all airlines are being charged in the same manner and there is no discrimination. Hence, there is a level playing field.

The problem needs to be looked into in its entirety. While the contradictory trends of increasing passenger traffic and falling profitability are an industry-wide problem, they do not apply uniformly to all airlines. Two full-service airlines, i.e. Air India and Kingfisher, stand out. Both these airlines are victims of their own mismanagement. Air India has always had the goodwill of the government and also public sympathy at the middle class level. The merger of Air India and Indian Airlines has truly been a disaster, and since then the entity has been living off government dole at the cost of taxpayers. The recommendation of the Committee on Public Undertakings of the Parliament to de-merger into two airlines under a common holding company seems to be the best way out for the time being to bring sanity to the disastrous merger carried out over four years ago.

Kingfisher Airlines is another story. A wrong business model compounded by the purchase of Deccan Airlines and micro-management by the owner has led to its decline. There is nobody to blame but the owner himself. Further, the airline has already been bailed out once by public sector banks by converting its debt into equity at a much higher rate while the share price plunged thereafter. It may be pointed out that private sector banks had refused to bail out this airline and it was government intervention that made the consortia led by State Bank of India to go in for it. They are now 23% owners of Kingfisher Airlines. The only thing possible with Kingfisher is to divest the present owner of its haphazard management (they are returning to the concept of full service with more emphasis on business class).

Now we come to the issue of the profitability of the rest of the airlines. Post-deregulation in 1994, after the abolition of Air Corporation Act, the DGCA gave up its practice of approving ticket prices, which the monopoly domestic airline, Indian Airlines, used to fix. As a result of competition, and later in 2001 the coming of the LCC airlines, price wars started and the prices of airline tickets came down, which led to the great growth in air traffic in India. The LCC model was a great success and it became the dominant player in the market with its share currently around 70%.The full-service airlines, like Air India, Jet and Kingfisher, turned partially to this model. While Air India started Air India Express, Jet bought Sahara Airlines and Kingfisher, Deccan. Both Jet and Kingfisher have appeared to have overpaid in their respective deals, which has impacted their balance sheets.

The LCC airlines continued to do well and ordered a very large number of new aircraft.

As new aircraft arrived, it led to overcapacity, bringing down ticket prices and margins.While the LCCs managed on thin margins, the full-service airlines had more difficulty in this respect. With no price control, we find that market leaders and price-setters changed from Air India and Jet to LCCs. The consumers welcomed the low prices but, during festival rush when prices hit the ceiling, they complained. Further, during tragedies like the Mangalore crash and the Leh cloudburst, the prices to these destinations shot through the roof. Meanwhile, Air India, having lost the market, started undercutting below operating costs, without a care to their mounting losses as they were on government life support through budgetary support. Most airlines started operating below cost.

It has been reported that the Federation of Indian Airlines has recently gone to the government to seek stoppage of the practice of setting predatory as well as excessive ticket prices. They are interested in competition between bands to be fixed by DGCA. DGCA is also empowered and obligated to ensure the ticket prices are neither predatory nor excessive. We need a healthy airline industry and, therefore, there is, I feel, a need to allow the competition to set prices between the two limits mentioned above, which is also the mandate of Competition Law in India, to keep our airline industry from becoming sick. As far as high ATF or sales tax on ATF is concerned, it should be reduced, but should not be used as a reason for decline in profitability as they are common to all.

The author is chairman of the International Foundation for Aviation, Aerospace and Development (India Chapter)

Of Bullet Trains and fast Movement

The Rs. 100,000 plus core Bullet Train Project of 508 kms connecting Ahmedabad to Mumbaibased on Shinkasen technology from Japanhas taken off like a bullet after approval in May 2017 by Prime Minister Modi and is expected to make its first run on 15th August 2022- within 5 years.There has been no delay in signing the agreement. With a total cost of Rs 1.1 lakh crores(USD 17billion),  Japanese Government has agreed to fund 81% of the total cost with a 50 year Yen loan of about Rs 88,087crores(USD 14 billion) from Government of Japan with a moratorium for repayment up to  15 years. 20% of the components will be supplied by Japan and rest manufactured in India.While the interest rate is as low as 0.1%, the exchange risk is to be borne by Indian Government. Where will the Yen-Rupee ratio move over time is anyone’s guess. In the past it has been adverse for India but if Rupee strengthens it will be favourable. The train is expected to reach a top speed of 350 km per hour with about twelve stops(this is incidentally not the fastest train- they have achieved 603km per hour).The train will run largely on stilts/ elevated ground except for 21 km of underground with undersea tunnel also. Each train will carry 1300 to 1600 passengers and will cover the journey of 502 km in 2 hours 8 minutes instead of 7 hours at present. The ticket price is proposed to be 1.5 times the current first class Mumbai- Ahmedabad ticket of Rs 2000 or sayat Rs 3000. It is also estimated that by 2023 the ridership will touch 36,000 daily. At this peak assuming 100% occupants the daily receipts from ticket sale would be Rs 10.80 cr or Rs 3,942 crores per annum. Would this be enough to pay back the loan? Based on this simple calculation and assuming 0% interest and  100% occupancy with ticket constant  at Rs 3000 we should be able to collect Rs 1,77,390 crores in 45 years of its operation which is sufficient to meet the loan of Rs 88,087 crand leave a balance of Rs 89,303 crores if the Yen-Rupee exchange rate remains constant.  What about the operating expenses? We have no idea of the quantum operating expenses as yet. On top of this is the Indian portion of 19%.However, the agreement, it is understood, involves training and technology transfer( with or without royalties?). It is also expected that there will be increase in the ticket price in the 45 years of repayment period.

With the financial package being offered along with training and technology transfer, the package becomes attractive. Therefore, this project should be treated as a technology demonstrator which could help the existing railway network in innovation and adaptation in improving their existing technology and help improve rest of the network. However, without this attractive financial package, another bullet train may not be financially viable at the present ticket price.

All said and done we should also consider all other modes of transport if we want to connect the length and breadth of the country with quick transport. While China has built a huge network of HST, it is reported that they have had to lower the ticket price more than once to fill it up and it has accumulated losses of $300 billion already. Can we risk such a proposition?

Meanwhile, aviation is making inroads into railways traditional passenger clientele. In fact, railways had been cross subsidizing its passengers fares against cargo, which has led to loss of their cargo to trucks. The Low Cost Carriers of Aviation sector(which dominate over 70% of Airline industry) have actually made a dent into the II class tier and above railway passenger  market. With double digit growth in domestic passenger aviation and over 900 new commercial aircrafts joining the existing fleet of 400 aircrafts in the next few years, the competition of future bullet trains with aviation will be fierce. It may be further added that Airline industry raises its own funds to finance new aircrafts unlike railways and therefore, do not add any burden to the exchequer. Further, Airports including Airports Authority of India is self sustaining and pays tax  dividend to government.

Today the largest civil Aircraft A380 is capable oftaking  853passengers in a single economy configuration. The bullet train will carry 1300 to 1600.Each A 380 aircraft should cost around Rs 2,500 crores (Listed price US$375million). if we allow a shuttle service of A380 from length and breadth of the country i.e. Dibrugarh to Mumbai; Delhi to Trivandrum; Jaipur to Chennai and many more, it might be able to take the load of passengers off the railways, which can then concentrate on cargo services , which is their mainstay. Ten such A380 will cost around Rs 25,000 crores and can connect the traffic of at least five cities. And there would be no capital cost to Government. No cost of putting upnew linesor stations. No land acquisition. The Railways could then limit itself to provide quick rail service between the airport and the city so that passengers have a seamless experience.

To conclude, Railways, at least for now, should concentrate onimproving  shorter distance services for passengers and more on their main bread and butter- the cargo services rather than High Speed Trains, a job which can be better served by Low Cost Airlines.

Dr SanatKaul is Chairman of International Foundation for Aviation, Aerospace and Development

Flawed and disappointing

After five and a half months of the new government coming to power, the Ministry of Civil Aviation has announced a draft aviation policy. Besides the Airport Infrastructure Policy of 1997, India is yet to produce a cabinet approved Civil Aviation Policy though draft policies have existed for over last 25 years. Now, we have yet another half baked four page draft document.

After enunciation of the economic importance of civil aviation, the ministry has made certain announcements. The proposed corporatisation of Airports Authority of India (AAI) and Pawan Hans Helicopters Limited is a good sign as it will bring in greater efficiency and transparency. 

However, there is no mention of hiving off and corporatising air traffic management, which has been on the anvil for some time and has been recommended by the Naresh Chandra Committee on the ‘Road Ahead’ as far back as 2002. Further, there is no mention of converting the Directorate General of Civil Aviation (DGCA) office into a Civil Aviation Authority – a much needed catalyst for an efficient DGCA – that was approved by the last government. This is a step backwards.

On specific issues starting with international aviation, it has proposed to develop six international hubs in India when we have none presently. We have also done great damage towards it than good by giving away very liberal bilateral rights to the Gulf region to sweeten our private deal leading to further re-enforcement of their hubs.

Hub creation is no easy task. It would be more realistic to propose a single international hub in India in the present context and work towards it. Linking hub creation with future bilateral air service agreements is a good suggestion.

The junking of the existing 5/20 policy (which stops younger airlines of India from flying abroad) will be a corollary to creating international hubs. However, the draft policy only mentions its review and not abolition. Further, this item is wrongly placed along with regional connectivity.

Domestic aviation and regional connectivity have been discussed. The policy proposes to tweak the existing Group Dispersal Guidelines (GDG) of DGCA to enhance regional connectivity. The GDG is a cross subsidy by private airlines forced by the DGCA and has not been favoured by the Naresh Chandra Committee which had recommended an Essential Aviation Services Fund (EASF). But, EASF finds no mention, which is unfortunate. This, again, is a regressive step.

The draft policy mentions that while developing airports one must ensure that related sectors such as manufacture, business, tourism and pilgrim are developed as well. While such a statement is welcome, with less than a dozen out of the 132 airports in India making profits, a policy towards unviable airports as part of general infrastructure needs to be developed. Creating an aerotropolis or developing good connectivity to tourist/pilgrimage spots with good hotels, will make the airports more viable.


Much needed subsidy While AAI is able to cross-subsidise all such airports from its profits, opening new regional airports in the private sector as well as running of regional air services may also require a subsidy, at least for a short period. But there is no mention of it.

While mention has been made of ‘upgrading’ DGCA, air cargo, Air India, corporatisation of AAI and Pawan Hans, there is, however, nothing in the draft policy regarding ground handling, aviation safety (we are already downgraded by the FAA of US) or security, satellite navigation, issues of leasing of aircraft or harmonising of laws with our international commitments.

Although, there is mention of developing Maintenance, Repair and Overhaul (MRO) facilities, we find that a similar sentiment was expressed by the then finance minister two budgets past. As the fiscal regime for MRO facilities is very high, India’s airlines find it cheaper to send the aircraft abroad for maintenance and repairs. This unfortunate tax treatment is stopping a remunerative industry from taking roots in our country to serve our own aircrafts.

One of the biggest flaws in the draft policy is that there is no mention of encouraging aviation related industries in India. As an emerging aviation power, India has lost sight of domestic growth of this industry in spite of the general call for ‘Make in India’. Even unmanned aviation vehicles (UAV), whose manufacture has started in India, have been banned by DGCA on grounds that International Civil Aviation Organisation (ICAO) has not made clear its Standards And Recommended Practices (SARPs) on it. As a matter of fact, rules regarding use of UAV within a country is not a subject matter for ICAO as it deals only with international aviation.

Air Navigation Service Provider (ANSP) has a great responsibility for both Indian and foreign aircraft. Unless it is modernised and kept up with the growth of aviation, it will lead to congestion in the air and compromise on air safety. While the policy speaks of improved service in very general terms, it does not mention the introduction of navigation by satellite, an area where India has taken a lead by launching GAGAN - the augmentation satellite for satellite-based navigation. There is no mention of hiving off the Air Navigation Services/ Communications, Navigation and Surveillance (ANS/CNS) functions from AAI into a new entity, an issue which has been debated for long.

Lastly, Air India has been retained as a holy cow. It went through an abortive process of divestment to a strategic partner in 2001, but then the policy was reversed not to divest it. This draft policy, unfortunately, continues the same. In one word, the draft policy may be described as ‘disappointing’.

(The writer, a former joint secretary, civil aviation ministry, is Chairman, International Foundation for Aviation Aerospace and Development)

DALAI LAMA VISITS TAWANG

Dalai Lama’s visit to Tawang on 8th – 9th October 2009 has raised the antennas of the Chinese Government who have expressed their unhappiness for allowing Dalai Lama to go to a territory which they claim to be theirs. The Chinese have consistently been seeking a forward policy with India claiming 93000 sq kilometres of Arunachal Pradesh right down to north bank of Brahmaputra in Assam (besides their occupation of land at Aksai Chin in Ladhak and in Gilgit in Pakistan occupied Kashmir). Now they even object to who should visit Arunachal Pradesh. Even Indian Prime Minister’s visit to Arunachal Pradesh has to been in this light. It is unfortunate that Prime Minister did not visit Tawang when in he visited Arunachal Pradesh last year (which was visited by an Indian Prime Minister after 9 years). While no reasons were provided as to why he did not keep Tawang in his itinerary, it appeared to the country that it was done to avoid the Chinese criticism. However, with his visit to Tawang in October 2009 this issue seems to have been put to rest. The latest issue of Dalai Lama’s visit has again put Chinese antennas up. The Chinese have been told politely but firmly that Dalai Lama is an honoured guest and he can go to any part of India as and when he likes. It is a little reassuring to the people of India that the government has taken a stand to allow Dalai Lama to visit Tawang in spite of the Chinese protest. What is little unsettling is that foreign Journalists have been barred from entering Arunachal during this period.

        Chinese aggressive postures have been consistent with the world including India even when they were a weak nation. It may be recalled that in spite of  Pt Jawahar Lal Nehru’s indulgence of the communist regime in China since their taking over in 1949, especially taking up the issue of their UN Membership in place of Taiwan when no western power was prepared to do so, has been paid back to India in a totally different manner. The Chinese occupation of Tibet by military force and thereafter treatment of Tibetans in a brutal manner has not been accepted by the world. India, however gave them a certificate in 1954 by the infamous Panchsheel agreement in which we not only conceded Tibet as a region of China, but voluntarily gave up our existing rights in Tibet inherited from the British including maintaining some troops. We also did not even seek a border settlement in return. The Chinese are now also using their economic and political might to downplay  visits of Dalai Lama of which the latest victims are President Obama for not meeting Dalai Lama during the latter visit to US, UK’s and France’s abject surrender. While India may not be a powerful country, it has always been ahead of times and taken stand. We provided a lot of accommodation to the Chinese in their early days when they were condemned by rest of the world. We even accepted Tibet as a region of China even though it was a military occupation (still remains). But now with their obnoxious behaviour towards India on issues of direct concern to India like renewed border claims in Arunachal, we need to have little modification in our foreign policy even if we have stand out alone and speak up to China.

        In the present instance, Dalai Lama’s visit to Tawang, while routine, has irked the Chinese. There is no reason why India should soft peddle the issue and not allow foreign journalists to visit Arunachal Pradesh. Infact, according to press at least four foreign journalist were issued 30 day permits to visit Arunachal Pradesh but the same was cancelled at the last minute. The foreign Correspondents club of South Asia has issue a terse statement to this effect.

          If the purpose of the present action is to appease the Chinese Government, it will not help. It will be taken in as yet another buckling in by India- confirming their view that a weak Indian government can always be bullied into submission.

Dr Sanat Kaul was earlier served in Arunachal Pradesh and Ministry of Home Affairs  

COMPLETE LIST OF ARTICLES [up to 2010]

· Nobody in the Control Tower, For some time, India hasn't     filled aviation safety posts, Indian Express, 31.05.2010

· What’s in the air, Financial Express, 21.05.2010

· Nuclear liability lessons from aviation, Financial Express, 07.05.2010

· Forecast: still cloudy, Financial Express, 22.04.2010

· Can a foreign COO save Air India? Financial Express, 13.04.2010 

· A regulator for our runways, Financial Express, 17.03.2010

·  Are Indian Airports Safe from Threat? Mail Today, 1^st January 2010

· At sea over where to build Mumbai’s second airport, Financial Express, 16^th October 2009

· This no way to manage AI, Financial Express, 1^st October 2009

·  Pilot Strike, Bird Strike – Financial Express, 18^th September 2009

· Yamuna’s Delhi Woes, Financial Express, 1^st September 2009

· Solution that was missed six years back, Financial Express 12^th August 2009

· A way out of Aviation Crisis, Financial Express 4^th August, 2009

· The wrong flight plan: What went wrong with Air India? Financial Express, July 17^th, 2009

·  How the Maharaja lost his sense of boeing, Financial Express, July 11^th 2009

· Hit those near-misses: With air safety in India nosediving, it’s time someone buckles the seat belt: Hindustan Times, February 14^th 2009.

·  A near miss too many: civil aviation needs an independent   regulatory authority to implement higher safety standards:   Financial Express, 12^th February 2009.

· Why India should ratify the Montreal Convention 1999’ (Indian Express, May 2007)

· ‘Higher Education in India: a missed opportunity’ ( ICRIER, New Delhi 2005)

· Evaluation of Study on the need and structure of an Educational Centre for Telecommunications in India : (European Commission: April 1996)

· ‘2020: Housing for Chandigarh’ (Chandigarh Administration, 1995)

·‘New Industrial Policy for Delhi & Neighbouring States’ (Indian Institute of Economic Growth & Institute of Economic Growth, Tokyo, 1995)

·   ‘Financial Aspects of Urban Governance’ (University of Toronto, 1994)

·  ‘Housing Finance and India’s Urban Poor’, Har Anand Publications, New Delhi, 1993  (Planning Commission, Government of India) [co authors: Dr. D.B.Gupta & Ms. Rita    Pandey]

· ‘Case study on the implementation of Punarvaas habitat & livelihood movement through multipurpose cooperatives’ (UN     Centre for Human Settlement, 1991) 

·  ‘Role of Infrastructure Development & Provision of Basic Services for Employment Generation in Asian Megalopolis’      (ARTEP-ILO, 1991) 

·‘Survey of Capital Markets & Monetary Policy in the 70s & 80s’ (ICRIER, New Delhi, 1990)

· ‘Wanted: Mortgage Insurance & Secondary Mortgage Market’ (Financial Express dt.16-4-1990) 

·  ‘Innovative Community Based Housing Finance & Credit System for Low Income Households in India’ (National Institute of public Finance & Policy, New Delhi, 1989) [co-author: Dr. D.B.Gupta]

· ‘Resource Mobilization for Housing’ (National Cooperative Housing Federation Bulletin, Vol. II No.3, 1989)

· ‘Cooperative Movement in Delhi: Achievements & Prospects’    (Management in Government Publishers, New Delhi, 1985)

· ‘Is the Building Society Model appropriate for Resource Mobilization in India: A report on the Working & Functioning of      Building Societies in U.K. & U.S.A (Chairman of Study Group appointed by National Cooperative Housing Federation of India, 1985) 

· ‘Housing in Delhi: Past, Present & Future: Role of Housing Cooperatives’ (Delhi Cooperative Housing Finance Society    Journal, 1985)

• ‘Housing Finance in Small & Medium Towns : SHIMLA a case study’ (Indian Human Settlement Programme in collaboration with Institute of Housing Studies, Rotterdam, Research Report No 11,1979)

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)