Draft Civil Aviation Policy’s Odd Logic

It is generally said that if a government policy pleases more people than it upsets, the devil lurks in the fine print. This could be the case with the draft National Civil Aviation Policy unveiled on October 30.

For one thing, the NDA government wants to make flying affordable so that 300 million middle-class citizens can fly at least once a year by 2022 by promoting regional airlines. Secondly, it wants to cap ticket prices (on a per-hour flying basis) at Rs 2,500 for these regional airlines.
For affordable flying, the plan is to charge current passengers two per cent on the current price of ticket. Effectively this will make regular flying slightly costly today, so tomorrow’s short-haul route passengers can benefit. Interesting logic. But experts fear that the suggestion to cap ticket prices, if applied to regular flights, could have wider ramifications.

There is a slew of proposals touching upon 22 aspects of the civil aviation sector up for comments and feedback. Some have been hailed by India Inc, including boosting regional connectivity by bringing 300 unused airstrips and airports (out of 476) into operation, so that at least one flight can land or take off. These will be mainly serviced by smaller aircraft. In the spirit of federalism, state governments have been asked to pitch in. Centre-state involvement will be 80:20 for viability gap funding. But one wonders whether state governments have been consulted before putting out the draft policy.

Going by the government’s version, the draft policy aims to provide a conducive environment and level playing field to aviation sub-sectors such as maintenance repairs and overhaul (MRO) services, general aviation, and aerospace manufacturing.

Not everyone is happy, however. Kapil Kaul, India Head of CAPA (Centre for Asia Pacific Aviation), expected a greater emphasis on addressing the negative fiscal environment faced by airlines such as sales tax on aviation turbine fuel, service tax on fares, airport charges, and withholding tax on aircraft leases. Mittu Chandilya, CEO & MD, AirAsia India, was surprised to see the lack of clarity or progress on the 5/20 rule. Jayant Nadkarni, President, Business Aircraft Operators Association, was disappointed as the draft overlooked irrational taxation on the import of small aircraft. Phee Teik Yeoh, CEO, Vistara, wants the government to completely scraps the 5/20 rule while IndiGo President Aditya Ghosh said setting up of low-cost airports would help bring in greater cost efficiency.

Civil Aviation Minister Ashok Gajapathi Raju expects the Cabinet to finalise the policy by December-end. For you and me, the policy will mean shelling out Rs 80-150 or more per ticket so that fellow Indians in smaller towns can fly some day. Asking Indians to give up the LPG subsidy to benefit the less fortunate is one thing. Forcing them to fund air travel is quite another.

(This story was published in BW | Businessworld Issue Dated 30-11-2015)