Fly in their ointment

Praful Patel is a civil aviation minister who8217;s an instinctive liberaliser. But as discussions on the new civil aviation policy pick up momentum, the question is will the new rules meet the standards of a liberal policy. And the best way to understand the situation is to ask this question vis-a-vis rules governing Indian carriers8217; overseas operations. The public sector monopoly on overseas flights was broken in 2003, and private carriers were allowed to fly to only Saarc countries and Southeast Asia. A rule was made then that only carriers with five years in active business would be eligible for this privilege. This was, as all such bureaucratic rules are, completely arbitrary except when viewed through the prism of corporate lobbying. The rule continued when all overseas sectors, bar the Gulf, was thrown open to private carriers in 2004.

The five-year rule and the Gulf monopoly mean higher fares and fewer travel options than would have been the case had more liberal norms been in place. They mean foreign carriers take away some of the business that could have earned profits for home entrepreneurs. CPI leader A.B. Bardhan has reportedly shot off a letter to the PM on aviation policy that talks of the prestige involved in national carriers flying abroad. That really is not the point. If the point is Air India, which now is a merged entity, having absorbed Indian Airlines, then surely keeping the Gulf sector as a sarkari monopoly doesn8217;t help the public sector carrier. Because sheltering it from competition makes it all the more unprepared for times that will inevitably come when the market is allowed to operate more freely. Imagine a post-liberalisation telecom policy that kept MTNL and BSNL away from private competition by giving them a monopoly over the most lucrative markets. Neither of the two public sector service providers would have been in a situation to take advantage of technological advances in telecom. And, most important, the consumer would have suffered.

Members of the GoM on the new aviation policy, headed by Pranab Mukherjee, members need to ask themselves why thousands of ordinary Indians who travel to and from the Gulf should be denied lower fares. Why India should pro-actively give business to Gulf airlines. And whether keeping Air India from competing prepares it for the future. The merger of AI and IA was supposed to add operational muscle. Protectionism is the wrong way to go about it. The Gulf monopoly is supposed to be abolished in 2008. A clear and earlier deadline should be set. And before this busy sector is opened up, the five-year rule has to go. If full reform is not immediately possible the GoM can set a lower entry barrier, for example, one year in active business. But real change must come.