Aviation policy will boost expansion

The draft national aviation policy, unveiled by the government and open to public comments, is intended to further open up the skies and make air travel more common and affordable. Since the aim of government policy for any sector is to expand it and make it more robust, it should not solely be judged by intentions. The test lies in whether the policy ingredients will actually benefit the sector when they are implemented. The main highlights of the draft policy are expansion of the room for new capacity to enter the sector, thrust on regional connectivity through incentives and infrastructure development, improvement of maintenance, repair and overhaul facilities, greater competition in some areas, raising of the FDI limit from 49 per cent to 50 per cent and simpler procedures for greater ease of business. The new capacity creation is to be achieved by an open skies policy outside a radius of 5,000 km and auctioning of flying rights within that radius. This can increase competition and earn more revenues to the government through licence fees, which can be invested in creating and improving infrastructure.

The policy envisages reviving more than 300 airports in various parts of the country, and offers air travel for up to one hour on regional routes for not more than Rs 2,500. It aims at 30 crore domestic ticketing by 2022 and 50 crore by 2027. But imposing a 2 per cent levy on all airline tickets is a bad proposal, as cross-subsidies – which make one person to pay for another – are a negative for any sector. Such arrangements are opaque too. Genuine and sensible incentives and financing methods have to be found to improve regional aviation infrastructure and to promote regional connectivity. The industry is rightly skeptical about plans which force them into uneconomic activities. But there are many elements which the industry likes in the policy, like liberalisation of ground handling rules. It seems the policy has been generally welcomed by the industry.

An issue on which a final decision has to be taken is the 5/20 rule which mandates that an airline should have five years of flying experience and 20 aircraft at its disp-osal before it can start international operations. The logic of the rule is contestable and it works against an even playing ground. The policy is shy on the FDI limit, as it has proposed only a marginal increase. An expert panel had recommended 100 per cent FDI. This will help to increase efficiency, capacities and competition. The government should seriously consider suggestions from the public and stakeholders before finalising the policy.