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India: Unlocking our skies

Dr. Shobhit Jain, IRS, Deputy CEO IBEF

Aug 29, 2016 18:29

In a major boost to regional air connectivity, the Government of India has recently announced that it plans to set up 50 new airports in the country over the next three years. Of these, at least 10 are expected to become operational over the next one year. It is noteworthy that India is already the  fastest growing aviation market in the world and the move to improve regional air connectivity is expected to further boost the industry. As part of the plan, the government is expected to take up some of the non-operational airports through a viability gap funding plan. This move is expected to give wings to the ambitious regional connectivity plan.

The cost of the project is expected to be around INR 5,000 crore (US$ 744 million) or INR 100 crore (US$ 14,833) for each airport. The plan involves both state and Union governments, with 80 per cent of the cost of setting up an airport being borne by the state government and the rest by the latter. The Government of India also plans to issue subsidies for a period of three years. The government expects to raise INR 500 crore (US$ 74.4 million) per year by levying a tax on airlines flying to these routes while offering them concessions to offset the cost. The Ministry of Aviation has recently signed its first memorandum of agreement for regional connectivity with the Maharashtra government. Some of the existing non-functional airports owned by the Airports Authority of India Ltd in Maharashtra, including Solapur, Jalgaon, Akola, Nanded and Shirdi, will be developed into no-frills airports.

Industry expert agree that move to develop the non-operational airports is more cost-effective than developing new airports from the scratch and is expected to offer a far better catchment area. It is expected to provide new set of growth opportunities to both domestic and international airlines alike.