Nervous takeoff

June 18, 2016 01:51 am | Updated November 26, 2021 10:23 pm IST

The >civil aviation policy , unveiled after much ado, ticks all the right boxes. The intent to fast-track the sector and harvest its multiplier effects on the economy, spurring investments, tourism and employment, is clear. Making flying affordable and bringing more cities on the air transport map — either by reviving defunct airports or building no-frills as well as full-fledged commercial terminals — would boost domestic traffic, but the target to more than triple passenger numbers by 2022 is too ambitious. A critical reform is the de-politicisation of identifying destinations. Indeed, resources ought to be deployed based on economics rather than as populist gestures to the hinterland voter. The >regional connectivity scheme will be purely demand-driven, on the basis of commitments from airlines and State governments. Aiming for a Rs.2,500 air ticket for hour-long flights by securing concessions from States and airports and subsidising airlines is a populist gesture. Implementing a subsidy-based network comes with its perils — oil prices tend to swing, and the wisdom of a dole for flyers on new routes to be financed by a levy on flyers on high-traffic routes is questionable. A complex regime would make airlines hesitate before investing in smaller aircraft for such routes.

Liberalising the right to fly abroad by scrapping the five-year domestic flight operations requirement doesn’t create real room for manoeuvre for investors. Quick offers of international routes may not mean much for new airlines; it is not financially feasible to scale up to a fleet of 20 aircraft just to get the right to deploy the next one on an overseas route. Similarly, while an open sky policy with SAARC countries is a positive, it has a misleading ring when applied to countries beyond a 5,000-km radius. India already has unused flying rights to EU countries and an open-sky policy with the U.S. and the U.K. The success of the regional connectivity plan will hinge on concessions from States in the form of free land, lower utility rates and tax cuts on aircraft fuel. The Centre has offered to grant special economic zone status for any aeronautical manufacturing activity. But such sops are not as tempting as they used to be. While the policy promises to bring down airport user charges and make flying cheaper, future tariffs at airports will be calculated on a hybrid till basis that allows operators to use just 30 per cent of non-aeronautical revenues to subsidise costs. This would not only push up airport costs, but also run counter to the single till approach followed by the independent airport economic regulator. The trajectory of the policy seems right, but several unseen variables remain. These could well throw Indian aviation off the flight path that the government has sought to determine.

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