The last two
decades of economic growth have also lead to exponential growth in air traffic
in India. In the financial year ending 2001 India counted 30 million passengers
per annum (mppa) on domestic routes, which went up to 106 mppa in year ended
2011. Total passenger traffic (international and domestic traffic put together)
grew from 42.5 mppa to 106 mppa during the same period. The two large aircraft
manufacturers, Airbus and Boeing have both projected a demand of around 1,000
aircraft for India in a twenty year period ending 2028. Indigo, India’s largest
low cost airline created history by ordering 100 Airbus A320 aircraft and
recreated history by adding another 180 recently. On top of the growth in
aviation, the sector creates jobs directly and in related sectors like
airports, ground handling, airport retail, public transport, cargo and
warehousing, etc. According to International Air Transport Association (IATA) aviation
in Singapore contributes 5.4% to the national GDP and supports over 100,000
jobs. In India the figure is 0.5%. What is wrong with Indian aviation?
There is more
than one leak in the tub, the biggest being absence of a comprehensive and
relevant civil aviation policy. The delayed civil aviation policy along with rules
like a “minimum of five years” experience of continuous operation of domestic
scheduled air transport services; and at least a twenty aircraft fleet” are
suffocating the growth potential of Indian carriers. Such restrictions not only
stifle the competitiveness of the industry, but also give an unfair advantage
to foreign carriers. A case in point is the Middle Eastern carriers. From full
service carriers like Emirates to low cost carriers like FlyDubai, all started
as small companies with a handful of aircraft and took their maiden flights to
Indian subcontinent. Indian carriers on the other hand have to wait for a
period of five years.
Second area is
ground infrastructure. Barring the five private airports (Delhi, Mumbai,
Bangalore, Hyderabad and Cochin) most Indian airports are struggling for better
management and expansion. The government started the process of privatising
thirty five non metro airports in 2008, but the process was cancelled without
any explanation. The most likely reason was immense pressure from labour unions
that rightly feared for job losses. A handful of Greenfield projects were
awarded but progress has been slow due to land acquisition issues. The latest
approach of the Airports Economic Regulatory Authority (AERA) to shift towards
a single till model (where airfield operations are subsidised by commercial
revenues) has made airport investments unattractive. Such arrangement will
deter investors from putting their money in airports.
The third area
where the civil aviation policy can help is Maintenance Repair and Overhaul
(MRO) business. The large fleet orders placed by Air India, Indigo, Jet Airways
and others will need MRO facilities to service their fleets. At present Air
India is the only airline to have its own MRO centre in India. All other airlines
send their aircraft to neighbouring countries like UAE, Singapore and Sri Lanka
for the maintenance works. This results in major loss of revenue, which could
have been added to the GDP. A major reason for lack of MRO facilities in India is
high tax and import duties on original equipments. The low labour cost
advantage in India is offset by the high taxes and duties. This is true for
both scheduled airlines like Air India, Jet Airways, Indigo and business
aviation companies.
Fourth, aviation
as such is not considered as a priority sector. Long standing demands like
allowing Foreign Direct Investment in airline by foreign airlines,
standardising aviation fuel taxes and a liberalised air service agreement regime
(which allows airlines to operate flights between two countries) have not been
addressed. Troubled airlines like Kingfisher can benefit from FDI and other
airlines too can gain expertise and know how.
Fifth, painfully
slow procedures for air freight clearance. Singapore and Hong Kong process air
freight shipments within hours; In India it takes a couple of days. Countries
which have a thriving aviation sector like that of Dubai or Singapore have
given a priority status to aviation and accordingly framed policies. India needs
to think of aviation as a sunrise sector and lay down policies to facilitate
the business. The policy framework should provide a level playing field to all
stakeholders and should not discriminate.
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