The civil aviation in India is witnessing a constant growth in its endeavour to provide connectivity to all. Shedding light on the current scenario, Minister of Civil Aviation, Shri Suresh Prabhu talks extensively about the various aspects that makes the Indian civil aviation sector for what it is today
What are the new Policy Initiatives taken by the Civil Aviation Ministry recently?
Under the visionary leadership and able guidance of Honourable Prime Minister Shri Narendra Modi Ji, Civil Aviation Sector has seen unprecedented growth in the country in the last four and half years of the government. During these years, we have thoroughly transformed the aviation sector and today India has emerged as the world’s fastest growing aviation market. The ministry has taken the following policy initiatives to propel and sustain growth in civil aviation sector:
- Unveiling of first ever National Civil Aviation Policy in June 2016.
- Launch of Regional Connectivity Scheme – Ude Desh Ka Aam Nagrik in October 2016.
- Launch of NABH (Next Generation Airports in Bharat) NIRMAN to prepare for one billion passenger trips announced in Budget 2018.
- Rationalisation of Maintenance, Repair and Overhaul (MRO) Policy with lower custom duty, simplification of goods clearance, zero rate VAT.
- Release of National Air Cargo Policy outline 2019.
- National Green Aviation Policy.
- Drone Eco-system Policy roadmap.
- Document on creating India as a next generation aviation hub.
- Project “Rupee Raftar” to showcase India as a powerhouse in aircraft financing and leasing.
- The government is actively involved in creating a Drone Ecosystem in India and a task force for the same has been constituted for leverage of the Drone technology.
- For the first time, the government has set up a Committee of Experts to recommend manufacturing of aircraft and helicopters and associated equipment for civil aviation sector in India.
- The government has taken a number of passenger-centric initiatives such as AirSewa 2.0 and DigiYatra. The ministry is also working on passenger charters, which will safeguard interest of the passengers and the ministry is also working to provide inflight WiFi facility and the standards for the same are being worked out.
The government had attempted the strategic sale of Air India last May. Unfortunately that could not go forward? Have you identified why that sale did not happen and could you take us through steps to revive the fortunes of Air India?
The Air India Specific Alternative Mechanism (AISAM) – The Group of Ministers constituted to decide in the matter took a decision that in view of volatile crude prices and adverse fluctuations in exchange rates, the present environment was not conducive to stimulate interest amongst investors for the strategic disinvestment of Air India in the near future. The issue would be revisited once global economic indicators, including oil prices and forex conditions, stabilise. AISAM has directed to separately decide the contours of the mode of disposal of the subsidiaries viz. Air India Engineering Services Limited (AIESL), Air India Air Transport Services Limited (AIATSL) and Airline Allied Services Limited (AASL). Further, AISAM has, inter-alia, approved the contours for sale of subsidiaries of AI and directed to expedite the sale of AIATSL.
The government has prepared a comprehensive financial package by transferring non-core debt and assets to a SPV; enhances operational efficiency, organisational and governance reforms and sale of non-core real estate assets and strategic disinvestment of subsidiaries such as Air India Air Transport Services Ltd.
While India’s aviation sector has been growing, there have been concerns about profitability of some companies. In this regard, is the ministry doing something about offering wider range of financial instruments for the sector?
Each airline prepares its business plan on the basis of their own market assessment and liabilities. Based on their business plan, the efficient operations and financial resources are the responsibility of the airlines. The government has no role in interfering with the business decisions of any airline. However, the government has taken several measures to revive the airline industry and ensure long-term viability of the sector. The airline industry is a dynamic industry, which requires continuous adjustment according to global and domestic needs. The government has constantly been responding to industry conditions and undertaking specific measures to facilitate and enable growth of the sector. Steps also include reduction of Central Excise Duty application on Aviation Turbine Fuel (ATF) from 14% to 11% w.e.f. October 11, 2018 and rationalisation of GST provisions, with a view to revive the airline industry.
Recent reports suggest that eight airline companies who saw massive opportunities with the UDAN scheme have shut down operations due to financial and operational challenges, high costs, scarcity of airport slots, maintenance issues and promoters’ inability to raise capital. Are you aware of the difficulties, and is the government doing anything on this front to revive the fortunes?
RCS flight operations of two selected airline operators namely Air Odisha and Air Deccan were closed in Odisha, Chhatisgarh, Northeast, Gujarat and Maharashtra networks. Subsequently after issuing showcause notices to these agencies, six networks have been cancelled (out of nine networks awarded to them) and cancelled airports have been opened for bidding in UDAN-3 for which bid evaluation process is in progress.
The International Civil Aviation Organization (ICAO) had recently raised some red flags against Indian airports’ security and inadequate infrastructure following an audit of Chennai airport and Bureau of Civil Aviation Security. Alongside, some 94 AAI-operated airports, too have reported losses. Could you tell us about the initiatives that the ministry is taking to ensure a turnaround?
ICAO conducted a safety audit of India in November 2015 and November 2017 wherein the Effective Implementation (EI) was 57.44. Based on the recent audit conducted by ICAO in November, 2018 covering areas of Legislation, Organisation, Air Navigation Services, Aerodromes and Accident Investigation, the EI has raised to approximately 73.6%.
In July 2018, the Federal Aviation Administration (FAA) conducted an IASA audit of DGCA to see India’s continued adherence to the standards of the Chicago Convention and its Annexes for civil aviation safety oversight followed by final consultations in November 2018 and has confirmed that India meets relevant requirements for aviation safety oversight. FAA has appreciated the commitment of India in ensuring effective safety oversight regarding India’s aviation system and has maintained India’s safety ratings as Category-I.
With regards to security, ICAO Audit of India was conducted from March 07-15, 2018. As per the observations received from ICAO, the Corrective Action Plan (CAP) was sent to them. The CAP has been reviewed by the Aviation Security Audit Section and was found to be satisfactory.
What is your growth projection of the Indian aviation sector? And what are the steps you would take to further push the potentials of India?
The total number of passengers carried by domestic airlines in 2018 was 1,390 lakh against 1,172 lakh passengers in 2017, thereby registering a growth of almost 19%. We see a forecast of double digit growth in the coming years.
With a view to promote the growth of Indian Aviation sector in a significant manner, the government has released the National Civil Aviation Policy (NCAP) 2016 on June 15, 2016. The aim of the government is to provide an ecosystem for the harmonised growth of various aviation subsectors, i.e. Airlines, Airports, Cargo, Maintenance Repairs and Overhaul services (MRO), General Aviation, Aerospace Manufacturing, Skill Development, etc. In compliance of NCAP-2016, broad steps taken are as under:
- Introduction of Regional Connectivity Scheme (RCS) – UDAN (Ude Desh ka Aam Nagrik) with an aim to facilitate/stimulate regional air connectivity by making it affordable.
- Revival of un-served or under-served routes under RCS – UDAN.
- Introduction of a new Category ‘Schedule Commuter Operator’ under Commercial Air Transport Operations.
- Rationalisation of Category-I routes under Route Dispersal Guidelines (RDGs) on the basis of criteria given in NCAP 2016.
- The requirement for 5/20 is modified and all airlines can commence international operations provided that they deploy 20 aircraft or 20% of total capacity (in terms of average number of seats on all departure put together) whichever is higher for domestic operations.
- Liberalisation of domestic code share points in India within the framework of Air Service Agreements (ASA).
- With a view to aid in modernisation of the existing airports to establish a high standard and help ease the pressure on the existing airports, 100% Foreign Direct Investment (FDI) under automatic route has now been allowed in Brownfield Airport projects. This move would also serve in further developing the domestic aviation infrastructure.
- Further, FDI limit for Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline has been raised from 49% to 100%, with FDI up to 49% permitted under automatic route and FDI beyond 49% through government approval. For Non-Resident Indians (NRIs), 100% FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air transport services up to the limit of 49% of their paid up capital and subject to the laid down conditions in the existing policy. Increasing the FDI limit for these aviation services shall not only encourage competition by lowering prices but shall also accord choice to consumers.
How does the UDAN scheme of the government help in passenger growth? What’s its progress till date?
The scheme allows the common man in far flung and non-connected airports in India, the option of flight connectivity being provided from their airports. The UDAN scheme has already been implemented and two rounds of bidding of routes have already been completed. UDAN-3 has received overwhelming response from the airline and a total of 189 RCS routes and 46 tourism routes have been awarded. Operations from six waterdromes have also been awarded under UDAN-3.
In 17 months of its launch, 4.5 lakh passengers flew under the scheme.
No of passengers flown in 2018 was 19% more than that of 2017, same period (source DGCA) and this has significant contribution of the UDAN Scheme. After the first round of auctions and/or under the bidding process, five airlines have secured license to operate 128 routes under UDAN Scheme. The government has also announced UDAN International and two routes are going to be awarded soon from Guwahati to Dhaka and Bangkok.
What is the ministry’s plan to develop airport infrastructure through PPP?
The four metros in India, Delhi, Mumbai, Hyderabad and Bengaluru, were developed successfully under PPP. Recently the Union Cabinet chaired by the Prime Minister has taken a decision to develop six more airports in the country under PPP. These include Mangaluru, Ahmedabad, Jaipur, Lucknow, Guwahati and Thiruvananthapuram.
The Airports Authority of India operates 126 airports and civil enclaves out of a total of 449 airports and airstrips located throughout India.
‘Flying for all’ is a very aspirational goal – a new aviation ecosystem will be required to maintain and sustain it. What are GOI plans?
Over the last five years, the government has been focusing on ensuring the building blocks are in place for this ecosystem, which serves the sector a long time. The ministry focused on aligning regulations and policy to the industry’s requirements / ‘NaBH Nirman’ for a massive airport infra development / enhancing productivity of current infra assets and integrating airports with overall transportation modes and regional plans/ privatisation of airport assets to unlock consumer value/ building educational and training infra / Digitisation across the aviation value chain to reduce costs and increase efficiencies/ ensuring costs are structurally lower by increasing efforts to bring ATF in GST and making airport charges critically softer and more important, making airport capex more accountable making strengthening consumer redressal system with AirSewa etc. Also, making PSUs more focused on profitability and AI turnaround plan is a part of these efforts.
We want to ensure building blocks are in place/ are robust and designed to deliver. This is what has been done whilst simultaneously delivering double digit growth for the last 50 months.
How will consumer interest be institutionally protected as aviation becomes more and more led by private sector?
The GOI policy goals are only to ensure public interests are protected. Privatisation is not only to increase efficiency/ enhance service/bring game changing connectivity but also to reduce costs and increase consumer value very significantly. We have and will further develop a strong oversight mechanism to ensure consumer interests are protected. We are focusing on ensuring we tighten delivery outcomes and bring consumer interests central to our objectives whilst balancing investor interest. The ministry is also working on bringing out passenger charter in this regard.
What is GOI planning to do to attract investment in air cargo/ logistics sector?
Air cargo/express and logistics is a very critical part of our economic competitiveness and the steps to achieve this are:
- Bring an enabling policy framework which removes all the structural barriers
- Ensure a right implementation model is in place because air cargo involves multiple stakeholders
- Design long-term infrastructure to a level required -in and around the airport like high throughput distribution centre’s and industrial assets
- Build a robust transshipment market, and
- Digitise the entire back end
- Like in other segments of the aviation value chain, we are working on creating a solid platform for growth- both for enhancing and sustaining growth.
What is GOI doing to build airport hubs in India?
India, especially Delhi, has the right geographic location than Dubai and we a have a massive market. Aircraft technology like 777s/A350s/787s connecting Indian cities non-stop with the world. However, we missed the core element of airport hubs which is anchor/ home-based carriers. We allowed our hubs to be build out of India. Our bilateral policy weakened our airlines so much by design.
In the last 4/5 years, we have addressed this issue. Policy is to allow Indian carriers to grow and become mega global carriers. It is critical to strengthen our carriers. Also, infrastructure is being fast tracked- both in and ground. Other issues like Visa on Arrival and E- Visa are being made more targeted.
For implementation of the idea “Flying for ALL”, the Regional Connectivity Scheme is going to play a crucial role. But incomplete implementation of Phase II due to premature demise of new airlines like Air Odisha and Air Deccan shows that all is not well with the scheme. How do you plan to tackle this issue?
Despite some hiccups, the overall performance of the scheme is satisfactory. The interest being shown by the established airlines is quite good and it will take the scheme forward. Regarding the failure of some new airlines, I can only say that minimum safety requirements cannot be compromised and only those who meet the requirements will survive.
The government is going to spend a good amount of money to develop 100 more airports in the country. Do you think that there will be sufficient flight operations at these airports to justify such huge expenditure?
Our vision is “Flying for ALL” and to convert it into reality, small townships will have to be connected by air. Therefore, we have to first provide the required infrastructure at these places. The flight operations will follow. Such projects will definitely take time to reach a commercially viable level. But we have to make a beginning because development of infrastructure takes time. It cannot be done overnight.
Despite a booming air transport industry, why services like MROs and flight simulators for transport category aircraft are not available in sufficient quantity in India, and our airlines have to go to countries like Malaysia, Indonesia, UAE, or elsewhere for getting such services.
Perhaps some tax-related and similar ease of doing business issues are there which we are trying to tackle. We hope to sort them out.
On the international side, based on the provisions of NCAP 2016, there has been no capacity increase for carriers belonging to Gulf countries, China and the countries in South East Asia for past few years. It is well known that carriers of these countries provide connectivity to far away destinations besides their own countries. Keeping this in view, if the same policy is continued for some more time, it may lead to shortage of capacity and passenger inconvenience on long distance sectors from India as the Indian carriers are not able to increase their services on the long distance routes. What is your take on that?
The capacity of air carriers is decided as per the Air Service Agreements and at the same time the government has to take care of the interest of the domestic carriers. However, the situation at present appears comfortable. Indian carriers like Indigo and SpiceJet are trying to extend their operations to some new destinations. Connectivity is also being provided by our airlines through code shares. The situation is being kept under watch and necessary action will be taken at appropriate time.