The new civil aviation policy is expected to be finalised early next financial year as the government is yet to firm up its position on critical issues, including changing or scrapping the existing 5/20 rule, which requires domestic airlines to have at least five years local experience and minimum 20 aircraft to be able to fly international routes.
Civil Aviation secretary RN Choubey said in Hyderabad on Wednesday that the ministry plans to finalise the Cabinet note for the policy by the end of this month after sorting out certain issues including the 5/20 rule, as per a PTI report. Speaking on the sidelines of the India Aviation-2016, Choubey said as many as 15 variations are being looked at with respect to the 5/20 rule.
Unveiled last October, the draft civil aviation policy was to be finalised by March and operationalised from April 1, 2016. Scrapping the 5/20 rule was one of the three options suggested in the draft policy, while the other two options were to retain the existing norm or relaxing it by introducing a new criteria of domestic flying credits.
Since international routes are more lucrative that the domestic routes, a tussle has ensued between established carriers and new players over the 5/20 norm with the latter seeking scrapping of it. Under the banner of Federation of Indian Airlines — established players such as Jet Airways, IndiGo, SpiceJet and GoAir — have claimed that the removal of 5/20 rule is tantamount to discrimination against the old players and the norm should be reviewed in tandem with a review of the Route Dispersal Guidelines (RDG). The RDG norm requires domestic carriers to operate a portion of their flights on economically unviable routes, to ensure better connectivity across the country. New airlines AirAsia India and Vistara, both operated by the Tatas through joint ventures with foreign partners, have said scrapping the 5/20 rule was in the interest of the aviation sector as well as the passengers. While the RDG guidelines are applied on new carriers as well, an early permission to fly overseas is expected to give them an edge over existing airlines.
Besides review of the 5/20 rule, the draft aviation policy has suggested tax incentives for scheduled commuter airlines, maintenance and repair works of aircraft and mooted 2 per cent levy on all air tickets to fund the Regional Connectivity Scheme. To make domestic maintenance, repair and overhaul work cheaper, the government proposed to exempt such activities from service tax and not levy any Value Added Tax.
Another major proposal is for raising Foreign Direct Investment limit in domestic carriers to 50 per cent from 49 per cent in case the open skies policy is implemented. Other proposed measures include setting up of no-frills airports and providing viability gap funding for airlines to bolster regional air connectivity.