New Civil Aviation Policy: Will it be a Game Changer?
"India finally has a structured civil aviation policy for the first time after independence. The aim is to make it as easy to fly for the common man as it is to go by rail or road. Currently the country has a middle class that is 350 million strong and is travelling a great deal. Of these, however, only 70 million have the resources to soar into the skies to reach their destination. There is thus a huge market waiting to be tapped.The policy has been announced also in view of the need to lure more investment to this sector. Investors have been cautious in the past in the absence of a stable regulatory framework for the industry. Such investment is needed not just in airlines but in infrastructure like development of airports, ground handling andmaintenance operations.The policy has been unveiled at a time of high growth and low oil prices which has led to competitive air fares. Plus the Indian aviation scene has seen the entry of two big new players with foreign collaboration - Vistara, a joint venture of Singapore Airlines and the Tata group, and Air Asia, headed by the iconic Malaysian entrepreneur, Tony Fernandes. The older more entrenched domestic players had been worried that these new entrants will get an unfair advantage under the new policy provisions. This is mainly in regard to the 5/20 rule laid down for those seeking to make international flights. This decade-old rule meant that aviation companies had to operate within the country for at least five years before launching international operations. In addition, they had to have a fleet of at least 20 aircraft to fly overseas.The new policy has done away with the five year rule but kept the provisions for having a fleet of at least 20 aircraft before being allowed to fly overseas. Since it will probably take the new airlines at least three years to achieve this capacity, it is now being described as the 3/20 rule. The older airlines are annoyed that they had to abide by this rule and it has now been done away with for the new players. But the fact is, it still does not allow them to start international operations immediately owing to the clause that they must have 20 aircraft. The airline industry has always been rife with speculation over lobbying with the government to twist rules but this time it seems that most of the provisions are pro-growth.Regional ConnectivityThe highlight of the new policy is undoubtedly the thrust on regional connectivity which has been talked about for a long time but has not been implemented as it should have been. Remote areas, plus hilly regions and the northeast have suffered greatly due to lack of air connections. Some of the proposals like the levy of a cess on domestic flights to the large metros envisage cross subsidies, a system that had been in vogue in the mid-90s as well. But in this case it is being combined with the revival of small airstrips as well as the reduced prices on short flights. The criticism that the cross subsidies will be complex may be justified but the plans will have to be put to the test to see if they are feasible. If it leads to a shift in passenger traffic even by 10 or 20 per cent from rail to road, then it will be a huge game changer for the transport sector.Besides, currently passenger transport modes are hugely congested. Rail travellers have to book months in advance to get confirmed reservations. Road travel iscomfortable only in some parts of the country like the southern region where bus networks are efficiently organized. The northern states have much poorer publictransport systems. Cheap air travel can provide a viable third option for people seeking to travel to smaller towns and remote areas.Cargo movement will also benefit significantly. Movement of essential goods by road or rail for remote areas has always been problematic. Rail and road transportnetworks have been struggling to meet the needs of efficient movement of goods all over the country. The sight of dangerously overloaded trucks is a common one,reflecting the state of affairs in the road transport sector. The provision of air connections is bound to improve cargo movement and hence development of these regions in the long run.The relaxation of rules relating to bilateral international routes will also promote economic development as export cargo needs to moved quickly in many cases. The plan is to liberalise the bilateral regime by permitting open skies between India and SAARC countries as well as countries beyond a 5000 kilometre radius from Delhi.In other words, there will be no ceiling on bilateral flights from these areas. Maintenance, repair and operations or MRO as it is known in the aviation industry is another area where the government has taken an innovative approach. It is proposed to abolish service tax on MRO services provided in India and increasetax- free period for storage of spares imported by MROs. The ultimate goal is to make this country a hub for MRO services in Asia. Experts say that of the 700million dollar MRO business, only 70 million dollars is carried out in India and this can be increased substantially.This is a brave new world being drawn up by the aviation ministry. The proof of the pudding,however, lies in the eating, as the old saying goes. Whether all thesegrand plans will actually transform the industry is yet to be seen. Even more importantly, the big question is, will it become possible for the common man to go by air as easily and cheaply as by rail or road. This will depend on how sincerely this policy is finally implemented on the ground.(Sushma Ramachandran is a senior journalist and commentator on economic affairs and business. The views are personal.)"