Much-delayed Civil Aviation Policy looks to generate employment

The Civil Aviation policy, first expected to be finalised by November-end, was later moved on to December 2015-end. Now, the government says that the policy may finally see the light of day in April this year. 

Disagreements over the 5/20 rule -- which requires air carriers to fly domestic routes for at least five years and have a fleet of 20 aircraft before they fly international routes -- is one of the major reasons for the delay in the policy. A 2% levy on cess on domestic and international flight tickets to pay for improving regional connectivity, is another tender nerve. 

While the government irons out the issues, a quick look at the draft aviation policy that tells us that one of the focuses of the government through the new policy is the generation of employment. 

According to a JM Financial report, India's air travel market is the sixth largest globally in terms of (the) total domestic seats and ninth largest in the world by total domestic and international seats.

"However, despite being the second most populous country, seventh largest in terms of area and among the top 10 in terms of GDP, India remains the most under-penetrated aviation market in the world. India’s annual domestic seats per capita stand at an abysmal 0.08 -- significantly lower than other developing countries like Brazil and China, where penetration rates are between 0.4x and 0.7x," the report says.

The new policy is aimed at developing the aviation sector in the country and making air travel a viable option for people, a move that will have "a very high multiplier effect on the economy," the government says.

The new policy draft on the Civil Aviation Ministry's website quotes a study done by the International Civil Aviation Organisation (ICAO), which states that every Rs 100 spent on air travel will lead to benefits of Rs 325. It further adds that every 100 direct jobs created in aviation have the potential to create 610 more related jobs. 

"The direct benefits of (the) development of civil aviation include employment and income generation in airline and airport operations, aircraft maintenance, air traffic management, ground handling services etc.," 

"The indirect benefits arise from the supply chain that is required for airline and airport operations including civil construction, multi-modal transport services, the supply of materials and products etc," the draft says.

The JM Financial report says that the government is targeting 300 million domestic tickets by 2022 (versus 70 million now) and 500 million by 2027. It is targeting increasing international ticketing to 200 million by 2027. 

This would only by possible if the government manages to make air travel more convenient, accessible, and viable for Indians. For this, the draft policy proposes several steps, including developing existing airports and improving regional connectivity.

1. Reviving existing airports 

-- Union Civil Aviation Minister Ashok Gajapathi Raju says that the country needs four modern airports -- two on the West Coast and two on the East Coast.

"At present, we have only three modern airports that have parallel runways at Delhi, Bangalore and Hyderabad and the fourth one is coming up in Vishakhapatnam. With the size of a country like India we need more modern airports, at least, two on the West Coast and two on the East Coast," Raju said on Thursday. 

-- About 400 underutilised and unserved airports to be revived at a cost of Rs 50 crore per airport. “This is in line with the Budget announcement of reviving 160 unserved and underserved airports and strips at an indicative cost of Rs 50 crore – Rs 100 crore each,” the JM Financial report says.

-- The draft policy states that the government will focus on providing the best possible service at all airports, with the potential for growth. The integrated 'multi-modal hub' should include rail, metro, bus and truck connectivity as well as accommodation and other services.

-- To make air travel more convenient, all airports will have the electronic check-in facility matching international standards and automated baggage handling facilities. The remaining airports will also get the services subsequently.

-- Six metropolitan airports -- Delhi, Mumbai, Chennai, Kolkata, Bangalore and Hyderabad -- would be developed as major international hubs and become the main access points for international travel to and from India. 

-- Development of airports in Chennai, Kolkata, Ahmedabad through public-private partnership (PPP) mode.

2. Taking aviation to remote areas

Providing optimum air connectivity to all regions is one of the sure-shot ways of ensuring more people consider air travel.

The government is planning to develop a “special package for the North-Eastern Region” to link remote locations in the country.

-- To encourage Indian carriers to fly to these remote areas, the policy will review Route Dispersal Guidelines which will let airlines add small aircraft and code sharing arrangements. According to the JM Financial report, the government may subsidise airlines to fly to these routes and even cap flying cost to Rs 2,500 per hour.

“The government will exempt Air Turbine Fuel (ATF) drawn from Regional Connectivity Scheme (RCS) airports from excise duty, apart from not levying airport charges for 10 years and no service tax on tickets under RCS,” it added.

The report also said that while the excise on ATF was hiked from 8% to 14%, under the RCS, the excise on ATF for supply to the aircraft will remain constant at 8%.

-- The government says that the aforementioned 5/20 rule will be reviewed to encourage new Indian players into the market.

-- While initially the Ministry had proposed a 2% cess on flight tickets in the revised draft unveiled on October 30, to pay for the regional connectivity action plan, it was later decided that the plan will be dropped after stakeholders of the industry opposed the move. Implementing a 2% cess would hike flight fare, discouraging air travel and defeating the very purpose of the policy. The global airlines' body IATA even called the move “against the International Civil Aviation Organisation's norms”.

3. E-governance

-- The processes of the Civil Aviation Ministry along with the offices under it will be digitised to improve efficiency and transparency. Services and clearance processes will be taken online.

-- The electronic procurement systems will be strengthened to ensure transparency and accountability.

4. Modernising Air Navigation Services

In a bid to cut flying time, reducing crowding at airports, the provision of Air Navigation Services (ANS) will be intensified. Navigational services will be upgraded to international standards.

5. Develop helipads, chopper aviation

A move which may see a rise in the number of air ambulances, the government is planning to develop chopper aviation. The draft calls for the development of the sector along with building new helipads which will help reduce congestion in big cities, help in medical evacuation, relief operations. Operators will be given “suitable incentives” in terms of operational costs.

7. Rationalising jet fuel price

Jet fuel in India costs about 40-45% more than in the overseas market, thanks to high taxes. The draft proposes steps to bring down the rate of taxes so that the country's cost are competitive. Jet fuel cost makes up nearly 50% of the cost of a flight ticket. Rationalising this will have a direct impact on the cost of flight tickets.