 "10 things to know about the draft civil aviation policy")
The Union government released a revised draft of the civil aviation policy on Friday proposing a viability gap funding for regional routes, liberal bilateral traffic rights, opening up foreign direct investment (FDI) in aviation, self-handling airport operations and retaining the route dispersal guidelines.
In a major move, the Union government may increase FDI in airlines from the present 49% to above 50% from 2020.
Union civil aviation minister Ashok Gajapathi Raju released the draft civil aviation policy inviting public comments for three weeks. Union civil aviation secretary RN Choubey gave an hour-long presentation on the policy here. The government will send the draft policy for Cabinet's approval by mid-December this year. Here is all you wanted to know about the policy
1) The Union civil aviation ministry has kept all the options open on international flying norms, known as the ‘5/20 rule’. Three options stated in the draft policy are: continuing the present norms, complete abolition from immediate effect and a credit-based system to replace it. At present, an airline requires five years of operations and 20 aircrafts in its fleet to go on international routes.
2) The government has decided not to scrap the route dispersal guidelines which mandate airlines to fly to remote areas. More routes will be added up in the Category I (metro) routes as destinations more than 700 km away domestically with annual traffic of 500,000 passengers will also become a part of it. As is the case presently, the airlines will need to deploy at least 10% of the capacity on the metro routes in the North Eastern region, Jammu & Kashmir, Andaman & Nicobar Islands and Lakshadweep (Category-II routes). The airlines will need to take the permission of the civil aviation ministry to withdraw existing operations in “north east region, Islands and Ladakh.”
3) The Union government has opened up the skies for destinations 5,000 km away from New Delhi thereby helping Europe, Australia, South America among others to operate flights to and from India without any restriction on the number of flights and seats.
4) The government announced giving foreign airlines traffic rights to key destinations within seven hours of flying away from India (Gulf region, Middle East and South East Asia) through auction as one of the ways. At present, countries sign an agreement to decide the flights or seats per week that can fly into each other’s country. “For countries within 5,000 km where domestic airlines have not fully utilised their quota, additional seats above existing rights would be allotted by bidding for a three year period,” said the draft policy.
5) The government will “consider” opening up the skies for these short-haul destinations from 1 April 2020. “If the government decides to go in for open skies”, there will be an increase in FDI in airlines from 49% at present to above 50%, the policy said.
6) A regional connectivity scheme, which will come into effect from 1 April 2016, has been framed wherein airfares for a one-hour flight will be capped at Rs 2,500. This will happen through revival of un-served or under-served airstrips. According to the scheme, a regional connectivity fund will be formed by charging 2% cess on air tickets on international and domestic routes excluding the intra-remote areas. The Centre will provide viability gap funding on air tickets from 80% of the regional connectivity fund and the rest will come from the state.
7) The state government concerned will identify potential airstrip on which a low-cost airport can be developed. It will have to provide a slew of incentives such as free land, concessional power, water and other tariffs, reduce value added tax (VAT) on aviation fuel to 1% or less on these airports. Additionally, the Centre will exempt service tax on air tickets under this scheme and the aviation fuel will be exempt from excise duty.
8) Union civil aviation secretary RN Choubey said the government wanted to make India a Maintenance, Repair and Overhaul (MRO) hub in Asia. The service tax on output services of MRO will be zero, aircraft maintenance tools will be exempted from custom duty, tax-free storage period of spare parts imported by MROs will be extended for three years and procedure for custom clearance will be simplified. MRO, ground handling, cargo and ATF at the airport will get the benefit of ‘infrastructure’ sector, the policy said. This move may irk private airlines which have been demanding an infrastructure status for a long time.
9) Also, Indian carriers will be free to enter into code-share agreements with foreign carriers for any destination within the country on a reciprocal basis, the policy noted. No prior approval of the ministry will be required and the airlines will only have to inform the ministry 30 days prior to starting the code-share flights.
10) In a major relief, the airlines may be allowed to self handle the services at airports, which include check-in, luggage handling, aircraft cleaning and servicing, loading and unloading of food and beverages. The airlines would be permitted to hire workers with at least one year of contract to perform the job. The present rule states only permanent employees handle ground operations but private airlines mostly either hire contract workers or use external agencies.
A separate set of regulation for helicopters will be notified by the government by 1 April 2016 and the government will facilitate the development of four helicopter hubs.
Airports will continue to be developed through public-private partnership (PPP) model. However, it has been proposed that AAI will “closely monitor” the capital expenditure of all future airports developed through PPP mode. Tariff at all future airports will be calculated on a ‘hybrid till’ basis.
1) The Union civil aviation ministry has kept all the options open on international flying norms, known as the ‘5/20 rule’. Three options stated in the draft policy are: continuing the present norms, complete abolition from immediate effect and a credit-based system to replace it. At present, an airline requires five years of operations and 20 aircrafts in its fleet to go on international routes.
2) The government has decided not to scrap the route dispersal guidelines which mandate airlines to fly to remote areas. More routes will be added up in the Category I (metro) routes as destinations more than 700 km away domestically with annual traffic of 500,000 passengers will also become a part of it. As is the case presently, the airlines will need to deploy at least 10% of the capacity on the metro routes in the North Eastern region, Jammu & Kashmir, Andaman & Nicobar Islands and Lakshadweep (Category-II routes). The airlines will need to take the permission of the civil aviation ministry to withdraw existing operations in “north east region, Islands and Ladakh.”
3) The Union government has opened up the skies for destinations 5,000 km away from New Delhi thereby helping Europe, Australia, South America among others to operate flights to and from India without any restriction on the number of flights and seats.
4) The government announced giving foreign airlines traffic rights to key destinations within seven hours of flying away from India (Gulf region, Middle East and South East Asia) through auction as one of the ways. At present, countries sign an agreement to decide the flights or seats per week that can fly into each other’s country. “For countries within 5,000 km where domestic airlines have not fully utilised their quota, additional seats above existing rights would be allotted by bidding for a three year period,” said the draft policy.
5) The government will “consider” opening up the skies for these short-haul destinations from 1 April 2020. “If the government decides to go in for open skies”, there will be an increase in FDI in airlines from 49% at present to above 50%, the policy said.
6) A regional connectivity scheme, which will come into effect from 1 April 2016, has been framed wherein airfares for a one-hour flight will be capped at Rs 2,500. This will happen through revival of un-served or under-served airstrips. According to the scheme, a regional connectivity fund will be formed by charging 2% cess on air tickets on international and domestic routes excluding the intra-remote areas. The Centre will provide viability gap funding on air tickets from 80% of the regional connectivity fund and the rest will come from the state.
7) The state government concerned will identify potential airstrip on which a low-cost airport can be developed. It will have to provide a slew of incentives such as free land, concessional power, water and other tariffs, reduce value added tax (VAT) on aviation fuel to 1% or less on these airports. Additionally, the Centre will exempt service tax on air tickets under this scheme and the aviation fuel will be exempt from excise duty.
8) Union civil aviation secretary RN Choubey said the government wanted to make India a Maintenance, Repair and Overhaul (MRO) hub in Asia. The service tax on output services of MRO will be zero, aircraft maintenance tools will be exempted from custom duty, tax-free storage period of spare parts imported by MROs will be extended for three years and procedure for custom clearance will be simplified. MRO, ground handling, cargo and ATF at the airport will get the benefit of ‘infrastructure’ sector, the policy said. This move may irk private airlines which have been demanding an infrastructure status for a long time.
9) Also, Indian carriers will be free to enter into code-share agreements with foreign carriers for any destination within the country on a reciprocal basis, the policy noted. No prior approval of the ministry will be required and the airlines will only have to inform the ministry 30 days prior to starting the code-share flights.
10) In a major relief, the airlines may be allowed to self handle the services at airports, which include check-in, luggage handling, aircraft cleaning and servicing, loading and unloading of food and beverages. The airlines would be permitted to hire workers with at least one year of contract to perform the job. The present rule states only permanent employees handle ground operations but private airlines mostly either hire contract workers or use external agencies.
A separate set of regulation for helicopters will be notified by the government by 1 April 2016 and the government will facilitate the development of four helicopter hubs.
Airports will continue to be developed through public-private partnership (PPP) model. However, it has been proposed that AAI will “closely monitor” the capital expenditure of all future airports developed through PPP mode. Tariff at all future airports will be calculated on a ‘hybrid till’ basis.