Cabinet refers policy on aviation to GoM

Consensus eludes Cabinet, private carriers' international plans on hold.

The Union Cabinet failed to reach a consensus on the new aviation policy and has referred it to a Group of Ministers (GoM), putting on hold Civil Aviation Minister Praful Patel's ambition of transforming India into a global aviation hub.

Called Vision 2020, the policy was expected to take up, among others, two key decisions that would have opened up the overseas market to private domestic carriers.

The first proposal was to give domestic carriers permission to fly abroad on a case-by-case basis, depending on their capabilities and the capacity available in the sector concerned.

Currently, only domestic carriers that have been in operation for five years are eligible for international operations (Jet Airways and JetLite, formerly Air Sahara, are the only two that fit the bill).

The second proposal sought to end in advance the monopoly of state-owned carriers Air-India and Indian Airlines on Gulf routes which expires in 2007 end (for which a two-year extension had been sought).

Other proposals included allowing 100 per cent foreign direct investment (FDI) in merchant airports, a separate operating licence for regional carriers, corporatisation of air traffic control (ATC) and restructuring the Directorate General of Civil Aviation and Airports Authority of India.

The referral will impact most of the private carriers that have publicly declared an interest in flying abroad "" Kingfisher Airlines, Air Deccan, SpiceJet and Indigo and even Air India Express (Air-India's low-cost subsidiary).

The last-named has declared an interest in flying to south-east Asia but has been permitted to fly only to the Gulf.

The freeing of the Gulf route would have had an adverse impact on Air-India and Indian Airlines, both of which derive a significant share of their revenues from this sector.

Jet Airways had applied for slots in at least five cities such as Bahrain and Muscat in anticipation of a change in the policy, but will now have to wait.

Patel isolated: At least eight Cabinet ministers objected to Patel's pet aviation policy. External Affairs Minister Pranab Mukherjee said he had concerns over air traffic congestion.

"Mukherjee suggested that it would be better to study the impact of the modernisation of Delhi and Mumbai airports before clearing the aviation policy," said a senior minister present at the meeting.

Defence Minister A K Antony drew attention to the fact that the armed forces had at least 65 airports and had serious concerns about sharing air space with civil aviation. He also had concerns about the corporatisation of air traffic control.

Meanwhile, Patel tried to swing matters by saying that domestic carriers were losing business to foreign airlines in absence of large-scale modernisation of India's civil aviation set-up.

"Whether private or government owned, we want Indian passengers to give business to our airlines," he is believed to have told the Cabinet.

Railway Minister Lalu Prasad and Commerce Minister Kamal Nath also joined the chorus opposing Patel's policy, after which Prime Minister Manmohan Singh decided to refer the matter to a GoM.

THE HIGH FLIERS
(Domestic airlines' international ambitions)

Kingfisher: New York, London

Air Deccan: Colombo, Bangkok, Singapore and Gulf

Jet Airways and Jetlite: 5 locations in the Gulf which include Muscat, Dubai, Doha, Kuwait and Bahrain (already fly to Singapore, New York, London, Bangkok)

Spice Jet: Bangkok, Singapore, Kuala Lumpur and Gulf

Indigo: Not firmed up plans but targeted destinations which are five hours from India, like Singapore

Air India Express: Allowed to fly to the Gulf ; wants to fly now to south east Asia

THE COMPETITIVE GULF
(Air-India and Indian Airlines's west Asian monopoly)

Have monopoly over the Gulf routes till Dec 2007 Sought to be extended to 2010.

Gulf constitutes 1/3rd of Air-India revenues.

It constitutes over 16% of Indian Airlines revenues