JOIN USFuture of aviation industry in India
With Boeing raising forecast for demand for civil aircrafts in India by 6% to 1,850 new planes in the next 20 years based on an elaborate method of calculation, there is no doubt that the aviation sector is in for a big growth, provided the government does not mess it up. Like the telecom sector, this sector can provide answers to many other economic sectors that are stuck up in a quagmire.
It has been adequately proved by economists that aviation is a catalyst to growth, but the price must be right. For example, tourism (both domestic and international) can be a major provider of economic prosperity as well as employment. But unless tourism ministry plans out its tourism circuits and arranges to have air connectivity at a competitive price to its competitors, the growth will be poor. Indians find it cheaper to holiday in Thailand than India, in spite of the fact that Thai Bhat has gone up in value.
Role in connectivity
Similarly, the industry requires good connectivity, and that is why Indian industry tends to concentrate on few urban areas. The five industrial corridors being planned will need airports to connect, as otherwise, no big industrialist would go there. As the middle class grows, time takes precedence over price and faster connectivity provides better results. Similarly, medical tourism should be based on connectivity so that our quality hospitals get patients from all over the world. So far airports have agreed to have hotels in their compound but not hospitals. Why not?
NCAP is commendable
The Ministry of Civil Aviation has come out finally with a new National Civil Aviation Policy (NCAP), which is fairly comprehensive and need to be complimented for it. While one can pick many holes in it, the fact that it has come out with a final policy after a 10-year wait is something to be said. The policy has stated up front that India has the potential to be the top three in terms of domestic and international passenger traffic. While this is certainly possible, it is necessary to have the right policy with the flexibility to tweak it when necessary.
This policy document deals both with international potential as well as regional connectivity. Here, it may be stated that unlike roads or railways where public funds come from budgetary sources, aviation development is largely from its own sources. Except for Air India, where budgetary resources have been invested after 84 years of its existence for its revival, both airlines and airports have come up on their own funds.
Role of various charges levied
While airlines finance themselves privately, Airports Authority of India has a non-lapsable fund from its income out of navigation charges and earnings from a dozen profit making airports. Here lies the rub. For airlines to be financially viable, airport charges and government taxes and fees need to be reasonable. Is this the situation in India?
The taxes and fees including service tax, airport development fee, among others, are very high and form more than half the price of the ticket. Airport charges at metro airports are also high. On top of that Directorate General of Civil Aviation (DGCA) has put, rightly, many consumer-friendly conditions on the airlines which makes cost of airline running very high. These conditions are not on other forms of transport like the railways and road transport, who are relatively less taxed.
There is a need to wean away passengers from railways and allow airline to take the load as railways tend to subsidise passengers from its freight earnings, which is neither good for the railways nor industry.
Railways share in freight in India has already decreased from 53% in 1986-87 to less than 30% today. Air India is now wooing the Rajdhani AC II tier passenger on key metro routes by offering them unsold airline seats four hours before departure on line. This integration of railways with airline is a great move by Air India in the right direction and hopefully other airlines will follow.
Bullet train — a failure
However, the current policy of the government in introducing a ‘trophy’ project like the ‘bullet train’ is totally unnecessary. Instead of spending Rs 1 lakh crore with concomitant land acquisition issues, it would be prudent and much cheaper instead to buy a few A380 aircraft with 555 seats and put them on a shuttle service between the two terminal points of the proposed bullet train at, perhaps, even with a little subsidy. As a matter of fact, tickets for a bullet train are much higher than ordinary railway tickets.
In order to build up an aviation infrastructure of airports the first step was taken in 1994 after abolition of Air Corporation Act of 1953, when monopoly of erstwhile Indian Airline was taken away. The DGCA then issued Route Dispersal Guidelines to all commercial airlines to cross subsidise unpopular routes of North-East, J&K and island territories. In the present policy, another subsidised scheme for regional connectivity called Regional Connectivity Scheme(RCS) has been introduced. This scheme is based on funding from passenger tickets/concession by state governments and by airports. While this scheme is conceptually good, it appears very complicated and difficult to implement. If successful, it will be a great scheme for connecting another 50 odd regional locations in India from exiting functional airports.
Lack of manufacturing
The thing to worry is the lack of aviation-based manufacturing in India. The Indian automobile industry as well as the space industry have done very well but aviation-based manufacturing has lagged behind. India desperately needs to build up its aviation manufacturing base. However, with the current government polices even MRO (Maintenance Repair and Overhaul) services have not been successful and our airlines send their aircraft abroad for servicing.
Lastly, but not the least, the new policy of permitting 100% equity of foreign airline in a domestic airline needs a relook. Besides security aspects, this will destroy the local airline industry and the very basis of nationally-owned airlines. India has done it unilaterally, but it will never be on a reciprocal basis, as no major aviation power will allow its airline industry to be destroyed.
(The author is Chairman of International Foundation for Aviation, Aerospace and Development-India Chapter)