Draft Civil Aviation policy elicits mixed response

NEW DELHI: The draft civil aviation policy received mixed response from the industry with most of the airlines describing it as "progressive" even as lack of clarity on the fate of 5/20 norm came under criticism from some quarters.

Describing the revised draft policy released by the government today as "pretty progressive", SpiceJet CMD Ajay Singh said the focus on regional connectivity is good for domestic aviation sector. "It (draft policy) has covered a lot of ground," he told PTI, adding that an attempt is being made to reduce taxes. Some procedural problems are also being addressed," he added. SpiceJet would be submitting its suggestions on the draft policy and certain issues such as high tax on ATF (Air Turbine Fuel), Singh said. IndiGo President Aditya Ghosh said the policy is broadly progressive and setting of low cost airports would help bring more cost efficiency in the aviation sector.

AirAsia India CEO and Managing Director Mittu Chandilya said it was surprising to see the lack of clarity and progress on 5/20 norm.On the draft policy, he said it was a good beginning as the suggestions made in the policy look positive for passengers and aviation sector as a whole. "It is extremely encouraging to see the commitment and foresight in outlaying a comprehensive view on MRO, low cost carrier airports infrastructure, ground handling initiatives, tax measures, affordable tariff balancing to boost air travel and encourage sustainable growth of our industry," he noted. Regional connectivity, small town airports would help airlines to geographically increase the footprint, he added.

Aviation think tank CAPA said the draft policy signals a positive intent to provide a direction and structural lift to the sector. "The draft policy reflects that the government is serious about delivering genuine change and meaningful outcomes," Centre for Asia Pacific Aviation's India Head Kapil Kaul said, adding that the draft does not mention about the future of Air India."The government's ownership of the national carrier negatively influences policy decisions and has cost the Indian tax payer billions of dollar. Clarity on what the government plans to do has a massive bearing in the industry," he said. According to Kaul, there should have been more emphasis on addressing the negative fiscal environment which airlines face such as sales tax on ATF, service tax on fares, airports charges and withholding tax on aircraft leases.

The Federation of India Airlines (FIA) said the policy is positive policy with mixed feeling. Supporting the continuation of 5/20 norm, FIA said that route dispersal guidelines should not be fixed as they are based on market dynamics. Welcoming the draft policy, industry grouping FICCI said it has laid down the long-term roadmap for developing India as the third largest aviation market. "It is encouraging that the government is planning to coordinate with all the stakeholders to provide greater regulatory certainty under the PPP mode. "Also commendable is the proposal for exempting MRO, cargo, ground handling players from all charges, other than a reasonable lease rental at all the future airport projects in the country. These are critical to the growth of the Indian aviation sector," it said. FICCI noted that Regional Connectivity Scheme (RCS) would contribute to the growth of remote areas and in turn have positive implications for overall growth of the economy.

Business Aircraft Operators Association (BAOA) President Jayant Nadkarni said the draft policy is a right step in promoting overall growth of the aviation industry. "However, it is disappointing to see that the policy has completely ignored the interests of business and general aviation in India, which forms an important part of the industry," he said. The policy has also overlooked the exorbitant and irrational taxation on import of small aircraft, which has been one of the major reasons for the retardation of growth of this sector, Nadkarni added. "This also has a wide ranging fallout on the other areas of the industry, and needs to be addressed on an urgent basis. We will submit a detailed response to the Ministry in days to come," he said.

Industry association CII said the draft policy has rightly addressed the key policy challenges in the sector with rationalisation of jet fuel cost, thrust on regional connectivity, liberalisation in open skies regime, promotion of air cargo, maintenance, repair and operations (MRO) through fiscal and regulatory concessions.

Industry body Assocham said proposals in the draft civil aviation policy would surely help in expansion of the sector. Noting that sincere efforts must be made to build a consensus among the Centre and the states on fiscal incentives being proposed in the policy, Assocham said VAT concession being proposed should be in sync with the GST regime."The issue of 5/20 should be settled keeping in view the level playing field for the players," it said.

About airfares, IndiGo President Aditya Ghosh said that creation of low cost airports becomes a reality, that would bring down lots of cost efficiency in the business. "If ground handling becomes efficient then lower fare would actually become a reality," he added.

Jet Airways and GoAir did not offer any comments on the draft policy saying that they are studying it. "This (5/20 norm) is one significant archaic and regressive policy (and its removal) would have unbridled the entire sector and shown optimism not only to current incumbents but also to potential future investors in the sector.

"It is disappointing that the draft is still we were on this (5/20 norm) several months ago. Hope that is addressed at the earliest to ensure Indian aviation is seen at par with other global aviation markets," Chandilya said. He emphasised that removal of this rule would have send a clear message on a progressive aviation policy. "While we are yet to see the draft of the new aviation policy, what I could say is that we have been calling for and will believe in completely scrapping the 5/20 rule from the very beginning without any conditions.

"And this is not to help us alone, but in national interest as we are the only country in the world (where) such a rule exists," Vistara's Prasad Menon said at an event in Mumbai. Noting that 5/20 rule discriminates against domestic carriers, Menon said foreign carriers who do not meet these criteria are allowed to operate in Indian skies while local airlines do not enjoy reciprocal rights to fly overseas. At present, about 70 per cent of inbound and outbound international traffic is catered by foreign carriers as domestic airlines are able to utilise only 26 per cent of the bilaterals, he added.

Vistara's Chief Executive Phee Teik Yeoh said it would be "in the national interest that the government completely scraps the 5/20 rule, as the aviation sector has the potential to generate 5 per cent or USD 250 billion of GDP by the turn of 2025, if at least some of the most cumbersome rules are scrapped".

Date: 
Monday, 9 November, 2015
Publication: 
The Economic Times