The proposed new civil aviation policy signals an important step towards reform by scrapping the 5/20 rule, which has long hindered the growth of individual airlines and of the sector. The rule, which requires domestic carriers to have a fleet of 20 aircraft and five years of operational experience in order to commence international services, skewed the field against new entrants by emphasising time over passenger miles. As per the new rules, an airline would need a minimum of five aircraft and 200 crore domestic flying credits (DFCs) before flying an international route.
This would require the airline to provide connectivity to underserved areas. But the carrier could benefit from the multiplier effect of DFCs earned from Category II and IIA routes and unused airports. Scheduled airlines may also be able to purchase DFCs from small, unscheduled carriers which fly remote routes, benefiting both parties. This formula, applied to new airlines and new routes allotted to old airlines, may enable an airline to begin international operations within a year. But it still doesn’t go far enough, since pilot experience and safety are the ideal determining criteria, not years or miles.
The government, however, needs to embark on further reforms envisaged in the draft policy, beginning with rationalising the price of aviation turbine fuel (ATF) and capping airport charges in line with global practices. ATF in India is among the costliest, thanks to the high base price and the 30 per cent sales tax levied by state governments. Although 2014 wasn’t good for Indian aviation — from the US FAA’s safety downgrade of India’s ranking to the near-closure of SpiceJet — domestic passenger traffic registered a growth of 4.5 per cent in 2013-14 over the previous year. As the number of aircraft also increases, the sector has to look at shifting some maintenance, repair and overhaul (MRO) operations home. That would save forex and create jobs, but MRO cannot take off without the requisite facilities and training.
Meanwhile, Abu Dhabi, Dubai and Singapore have grown as aviation hubs at India’s expense. With the economy growing again and oil prices at a historic low, 2015 is a make or break year for India’s civil aviation. The final policy to be notified later this month should reflect a commitment to take on the challenge.
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