Indian aviation companies expect that the new civil aviation policy — the draft version of which is expected to be out soon — should be focused on benefitting Indian carriers rather than the current practice of favouring foreign carriers. If the government is sincere about a workable and practical civil aviation policy, “one that attains the objective of putting Indian aviation industry on a robust growth trajectory, then issues like high taxes on aviation fuel (ATF) and high airport charges need to be addressed in the new policy,” says Jitender Bhargava, former executive director, Air-India and author of The Descent of Air-India. Since the government has been harping on its policy of Make in India, there is no rationale why the Indian aviation market would be exploited by the foreign airlines at the expense of Indian carriers, adds Bhargava.
Apart from the higher taxation on aviation fuels (resulting into higher ATF prices), high airport charges have made the operational cost quite prohibitive for the Indian aviation sector. Aviation industry revolves around airlines but the tragedy in India has been that everyone associated with the sector (government’s taxation authorities, travel agents and online travel websites) make money except for the airlines. The other major irritant has been the 5/20 rule that requires domestic carriers to have at least 5 years of domestic operations and have 20 aircrafts before being allowed to fly to overseas destinations. “This 5/20 is a prohibitive regulation that caps the growth of the Indian aviation industry and therefore needs to be scrapped,” says Binit Somaia, senior aviation analyst, Centre for Aviation (CAPA). India has been without a civil aviation policy for decades now. Aviation mavens say that having some policy is better than nothing. Ever since the opening up of Indian economy in 1991, the policy makers have been taking ad-hoc decisions as a kneejerk reaction to an emerging situation or keeping a particular airline or a country in view. Aviation mavens say that despite being geographically very well placed and having a huge market, Indian policy makers have not been able to visualise the potential of Indian aviation sector. The potential of Indian civil aviation sector has been quantified by a study conducted by CAPA, titled “Maximising the contribution of Aviation to the Indian economy”. It says that Indian civil aviation sector has the incremental potential to contribute over 5% to India’s GDP by creating an economic value of up to $250 billion on an annual basis by 2025. It also has the potential to generate direct employment of more than 2.3 million people by 2050.
To exploit such a potential, India needs a dynamic new policy which focuses on the growth of Indian carriers. The current practice of doling out seats to foreign carriers would be like outsourcing the benefits of growth to the foreign airlines. “Indian traffic is like a natural resource, like coal, which needs to be exploited by Indian Carriers,” says Bhargava. The new policy should also put up a new regulatory agency for the proper functioning of the industry, he adds.