Civil aviation ministry clears aviation policy for final cabinet approval

New Delhi: After months of debate, a new aviation policy, showcasing key areas of reform, is ready for clearance by the Union cabinet in the run-up to the government’s second anniversary.

The civil aviation ministry, having completed inter-ministerial consultations on the policy, has moved a cabinet note on it and is pushing for clearance next week. The Narendra Modi government completes two years in office on 26 May.

The policy was first presented in November 2014 and revised in October 2015 before being put up for public comments. But its introduction was delayed because of disagreements over several important areas.

“The cabinet note has been sent with all the comments. It’s finally up to the prime minister to decide what will be the agenda of the next cabinet meeting but we are pushing for its approval on Wednesday,” said a government official who declined to be named.

If approved, the new policy will be showcased as a key reform by the government—one meant to increase regional connectivity across India. With 80 million passengers already and growing at 20% annually, India is expected to become the third largest aviation market by 2020.

The main proposals of the policy include allowing new airlines to fly abroad, the introduction of more regional flights and a new formula for granting bilateral flying rights.

The aviation ministry has been conducting consultations over the past few weeks with other ministries and cabinet ministers who were tasked to prepare the final policy, said a second government official, who also declined to be named.

Several ministries, including home and external affairs, have expressed diverse views on the policy. Some have opposed a proposal to remove the so-called 5/20 rule, which mandates that only airlines with five years of domestic flying experience and a fleet of at least 20 aircraft can fly to foreign destinations.

The preconditions may be relaxed, so that while the 20 aircraft rule is retained, the one for five years’ flying experience could be changed to ensuring that at least 20% of the airline’s total capacity has been engaged in domestic flying.

The regional connectivity recommendations may include a proposal for a cess on airfare—each flight could be charged an additional Rs.8,000—and unprofitable routes offset with the collected corpus. The initial corpus is expected to be about Rs.500 crore annually.

The policy is also likely to recommend new rules for the granting of bilateral international flying rights, for which the ministry has been ticked off by the Comptroller and Auditor General in its last report.

The policy has, however, divided the airline industry.

It has seen strong reactions and lobbying from older airlines such as IndiGo (InterGlobe Aviation Ltd), Jet Airways (India) Ltd, SpiceJet Ltd and GoAir and new entrants such as Vistara and AirAsia. The latter want the 5/20 rule scrapped, while older airlines want it to stay.

The established airlines have threatened to move the courts if the government relaxes this provision. They want new airlines to also complete their term of five years of domestic flying before being allowed to fly abroad.

“The old rule mostly benefited foreign airlines and greatly restricted Indian carriers,” said an aviation analyst who declined to be identified. “It’s time that the policies are decided on addressing issues of competing with foreigners and not get bogged down with petty domestic issues.”

The policy does not cover state-run Air India, which gets most of the budgetary allocation from the aviation ministry. Plans to form a new regulator to check on air safety issues is also not part of the policy, the ministry told Parliament this week.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.