Expert Speak India Matters
Published on Jul 18, 2016
The National Civil Aviation Policy needs clarity

The recently announced National Civil Aviation Policy, 2016, has been a case of better late than never. Had the policy been put in place a decade ago, the civil aviation sector in India would have bloomed into a mature sector with its stakeholders cornering sizeable share of the outbound international traffic from India.

While much has been made of the civil aviation policy which indeed has been a breath of fresh air, there are still some serious lacunae in the policy that are beginning to emerge as one examines it closely. Fixing of fares at ₹2500 in a policy guideline to promote regional connectivity may appeal to the traveller, but it does not make a business case for the operators. How can ₹2500 be a sacrosanct figure as aviation turbine fuel (ATF) prices are changed frequently? It will be an impossible task for the understaffed Directorate General of Civil Aviation (DGCA) to get the accounts of the regional airlines verified before recommending any government funding of their financial gap in operations. There will be manipulation and many fly by night operators will come in and corruption will reach new areas.

The government does not seem to have adequately examined the legality of having differential tax rates for ATF supplied to the regional airlines and others as the former would also be flying in and out of other national and international airports.

If one goes by the report in a leading daily on  July 1, the issue of subsidy to the regional airlines seems to be one big confusion. The Ministry now says the subsidy will be in proportion to the distance travelled. One hour flight will be taken to cover a distance of 500 to 600 km, but this in real will depend on the basis of the type of the aircraft and would differ in each case. The centre is supposed to, provide 80% subsidy and the state the balance 20%. What has not been made clear in the policy are:

  1. Who will certify the accounts of the regional airlines — the DGCA or specially appointed auditors?
  2. While the ministry proposes to meet the subsidy partly by levying a departure charge of ₹8000 from all domestic airports, how will the states meet their portion of the subsidy?
  3. How will the airlines bear this cost whose impact on passengers will vary from aircraft to aircraft based on its carrying capacity?

It seems to be a case of getting the approval of the cabinet on a seeming assurance of the ministry that the cost of subsidy will not be on the budget.

When questions are being asked, the answers seem to be more confusing.

Unless the Ministry of civil aviation clearly brings out the nature of  the subsidy to the regional airlines, how the subsidy will be calculated, what precautions  will be taken to prevent fudging of accounts and how it will be funded without a drain on the budget — these are all questions with no good answer. It will be a non — starter, to say the least.

In the last two decades, various governments have been trying to introduce a linear fiscal policy removing cesses whereas the present government has started imposing cesses on items such as diesel oil, Krishi Kalyan cess and now with the aviation cess, it has completely set at naught the policies followed by the previous governments to clean the web of taxation in India. This is a case of taking one step forward and two steps back for the NDA, which is pushing hard for a GST that integrates all taxes into one. Contrary to all the efforts that have been made to make Indian taxation system simple, clear, intelligent and easy compliance, all the cesses that are being introduced in the last two years including the one which is being introduced via the Viability Gap Funding (VGF) is setting back the clock. The VGF cost and the means of financing it should have been worked out before being announced. It is a case of putting the cart before the horse.

One of the more serious areas of concern relates to security, as addressed in para 4(c). It calls for the involvement of state government in state safety programme. Aviation safety has been traditionally a central subject. The experience of handling the 1993 Indian Airlines hijack shows the lack of capacity and capability and the ineffectiveness of the state police can mess up things. The then Punjab Police allegedly shot and killed the hijacker who was reportedly captured alive by the NSG and the government of India (GOI) could not know the reasons and or the people who planned the hijack. The GOI must not allow state police to handle hijacks as it has international implications. Either the central government must undertake to train the state police in this domain so as to handle such contingencies like the 1993 hijacking or else the centre must come up with an institutional mechanism such as the National Transportation Safety Board (NTSB) in the US, who will take complete charge when a situation arises.

A welcome move in the policy is the abolition of the 5/20 and making it a 0/20, provided the DGCA ensures without favouritism that only those pilots who are authorised to fly the Transatlantic and Pacific routes will be allowed to fly.

There is no mention of aviation sports — just as in the case of motor sports, aviation sports is a key area which will ensure a culture of aviation to spread amongst the youth in India. The government can also permit single engine cargo flights from regional airports to various other airports so that wastage of fruits and vegetables as well as perishable exotic products such as sea food can be avoided. They should have cold storages in airports in the hinterland which have a large production base for fruits and vegetables. The development of the tertiary aviation sector will also ensure the employability of pilots graduating from flying schools and will also bring in business for the excess capacity lying unused across various Maintenance, Repair and Overhaul (MRO) facilities in the country. With regard to the development of regional airports, the GOI should appoint the local MP as chairman of a committee which will ensure cleanliness and also advise on other matters concerning passenger requirements. The local airport should be a matter of pride for the local people.

It is for the first time since the V. P. Singh government took a bold decision in 1991 to introduce air-taxis a gimmick phrase to allow private airlines to break the monopoly of the state-run Indian Airlines even without amending the Air Corporations Act, the present government has scored by announcing a cabinet decided aviation policy. It has to make herculean efforts to elicit cooperation from some reluctant states to make the regional aviation policy a success. States will have to be encouraged by proving some of the huge benefits in ha area of food preservation among other things.  It will give a boost to trade and commerce but also increase employment opportunities in the hinterland. All in all, the successful implementation of the policy will add to the gross domestic product of the state.

The author is an aerospace and defence consultant, based in New Delhi.

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