Flying high

The draft aviation policy, released on Friday, aims to provide affordable flying to small-town and small-income travellers, open up the sector to a larger number of foreign airlines and create jobs by making India an Asian hub for the maintenance, repair and overhaul of planes. There are 476 airports and airstrips in the country of which only 75 are in use. Many other airports are under-utilised for want of adequate demand. More no-frills airports can be set up in non-metro cities with Centre-state funding in the 80-20 ratio. The new policy, which is open to the public for comments, puts a cap on air fares at Rs 2,500 in small towns. There is also a stipulation for the airlines to have mandatory flights to low-traffic destinations like the North-East and Jammu and Kashmir and Andaman and Nicobar Islands.

 

The policy shows the government is still caught in the control and command mindset. While offering tax concessions and incentives to airlines the government may be within its rights to expect some public service from private airlines, the truth is it is also important to make airlines commercially viable. If the cost of setting up a regional airline operating aircraft of 50-100 capacity is Rs 150-200 crore, it may be difficult to recover the investment, leave alone make profits. Aviation is a capital-intensive industry with cut-throat competition. Let there be competitive rates so that airlines decide whether to take the risk of expansion or not. If the airlines have recovered, it is because of a sharp fall in fuel prices. Oil may not stay cheap forever.   

 

The draft policy opens up Indian skies and offers airlines from Europe, Africa, Australia and the Americas opportunities to operate flights to and from India without restrictions on seats and flights. There is a proposal to raise the FDI (foreign direct investment) limit beyond 50 per cent from 2020. This can benefit as well as hit domestic airlines. The policy has ignored Air India's survival in this highly competitive world. Customers will have a greater choice but taxpayers may have to pay more to keep Air India in business.