The draft aviation policy aims to make air travel cheaper, easier and India more connected. It will take flying to the masses the draft policy enunciates. The policy has been circulated for stakeholder inputs, after which it would be sent to the cabinet for approval. The major focus of the policy is the domestic sector and infrastructure development in this vital sector.
Fares for short distances flight (1 hour) has been capped. Regional Connectivity is targeted in a major way. A levy of 2 per cent will be imposed on all domestic and international ticketing from January 1, 2016 for raising viability gap funding for improving the regional connectivity at affordable tariff. This measure will be a tourism and employment booster. Because, once the air connectivity to the regional centres become affordable and the infrastructure capable, the hospitality industry will grow and with it the job creating cycle will be set in motion in the non-metro areas of the country.
Since neighborhood policy is a major thrust of the Modi government SAARC connectivity is an important dimension of the policy and Open Sky liberalizations are proposed in this sector. This will also be applicable to countries located within 5,000 kms of radius of India. FDI hikes above 50 pc in airlines in such cases will be permissible. Consumers will get the benefit of increased choice and better rates.
Another pro-consumer move is the liberalization of code sharing. The government proposes full liberalization under which Indian carriers will be free to enter into code-sharing agreements with foreign carriers for any destination within India on a reciprocal basis. For international code share it is subject to the Air Service Agreement (ASA) between India and the relevant country. No prior approvals from government will be required.
The policy’s focus on developing India as a MRO hub in Asia and the many provisions for helicopter usage would develop these two segments as new areas of business. The government sees the MRO as a business worth Rs 5,000 cr and wants that it should come to India. It is a business, which currently goes to Singapore, Sri Lanka & the gulf countries. The development of heli-hubs and relaxed flying rules will promote helicopter use.
But there are issues, which will be contested. And these are first, the 5/20 rule which is being criticized by the new entrants as being discriminatory for them. Second, the preference for Hybrid till method over Single till method for determining tariff, will be called into question by consumer groups and airlines.
