Good regional aviation infra, the need of the hour

The finance minister in his budget speech made a mention of developing new airports in Tier 1 and 2 cities through the Airports Authority of India and the public private partnership (PPP) route.

 While there is talk of building a regional aviation infrastructure in India, the ground work and policy support done for it remains poor and any chance of a change remains elusive. 

In a recent seminar on the issue, the stakeholders consisting of airlines and airports came up with their problems. Regional development through aviation is still considered elitist and not a priority. Yet, the prime minister wants tourism, including remote area tourism, and inclusive growth of remote areas. If it is felt that our poor quality roads and railways will not improve overnight, a good aviation infrastructure is necessary. 

India has now reached a level of development where regional aviation can play a major role in regional economic development. Connectivity to remote locations and their development also poses a challenge. India is lucky to have 447 airports on book, built largely during the Second World War and now lying mostly abandoned. However, the land in most cases is secure with AAI or state governments. Indian civil aviation sector has given huge volumes in growth revenues to Central and state governments, but there is a bigger prize waiting if right policies are followed.
 Privatisation of airlines of 1990s needs a second phase for regional growth in aviation.

The issues of viability of both regional airports and airlines have to be taken up in earnest. Only AAI could sustain the loss- making airports through its non-lapsable fund coming out of its monopoly over airports and air navigation. However, the PPP model of development can only succeed if this is done through creation of a non-lapsable fund as suggested by Naresh Chandra Committee for Essential Air Services Fund or by Regional Air Connectivity Fund as suggested in the report by Deloitte Touche Dohmatsu India Private Limited to promote both regional as well as remote areas. Or, even AAIs funds are made available for this purpose.

It is apparent that the aviation sector is overtaxed especially for domestic aviation. Further, cartelisation of air turbine fuel (ATF) suppliers- the public sector oil companies - and the high taxation on ATF also needs to be examined. As barely 2 per cent of Indians travel by air and over 70 per cent of the traffic is between metro cities, there is a need to diversify the base and spread commercial aviation to Tier 2 and 3 towns. There is also a need to think in terms of developing aerotropolis by which remote areas can be developed for both industry and tourism purposes. With this,  regional airports and airlines servicing the airport can become viable. This can replace the high non-aero revenues which can cross-subsidise a metro airport.Low cost structures

The need for low cost structures is important for both airports and airlines. This can be achieved by bringing in new technology for passenger and cargo handling as well as lowering the high cost norms of security imposed by Bureau of Civil Aviation Security. Both airports and airlines have to adapt to requirements of the emerging sector. As regional aviation grows, it will bring in direct revenue to the state and Central governments as well as indirect revenue and growth to the people. It will be a win-win for all.

This, therefore, represents tremendous opportunity for the private sector to invest in regional airport development. Telecom sector growth in India is an example to emulate. Further, the Universal Obligation Fund of Telecom sector, so created for development of rural areas, needs to be replicated for aviation too.The ministry had accorded approval for 15 airports few years back under PPP but most of the airports have failed to take off because of various reasons including viability. Only four out of these are making progress towards operations. There are further 32 non-operational airports identified to be offered on PPP basis but this may take time after government is through with the first 15.  

All the right triggers are available for growth of regional aviation. The need of the hour is to harness these growth triggers but with a partnership with private players at one end and the Central and State governments on the other, to turn potential into reality. Challenges facing the smaller airports are well known.  Profitability remains a key challenge. For example, Nanded airport under PPP by private players is running annual loss of Rs 5 crore due to high cost of operation and low level of scheduled airline activity. Even one flight, which used to operate, has also stopped. 

Stray  examples of good cases such as Madhya Pradesh and Karnataka governments underwriting riding seats and Department of North East Region providing Rs 50 crore subsidy exists but this does not amount to a policy. 

The Indian Council for Social Science Research has chosen the Andaman and Nicobar Islands for a study on the impact of aviation on social and economic growth of a remote location. They have chosen the Andaman and Nicobar Islands for the study which will show the potential of economic development and welfare of local people of the Andaman and Nicobar Islands through aviation. 

(The writer is a retired IAS officer and chairman, International Foundation for Aviation, Aerospace and Development - India Chapter)