Fresh investments elude airlines

REALITY CHECK PART III

In 1999, Prime Minister Atal Bihari Vajpayee had announced grand plans for the civil aviation sector. Five years later, there has been little movement on the ground.

A comprehensive civil aviation policy eludes the stakeholders even today. There has been no noteworthy improvement in the functioning of the country's international airports, even as state-owned Indian Airlines continues to be mired in losses, though Air-India has seen a rise in its bottomline. Even private airlines are in the red.

Clearly, what the airlines, state-owned as well as private, need is a dose of fresh investment. Unfortunately, the Vajpayee government has done little to open up the sector. The plan to increase the foreign direct investment limit in air services to 49 per cent, which would have helped private airlines attract funds from abroad and increased the number of operators in the country, is yet to take off.

Similarly, the fleet acquisition plan of Indian Airlines and Air India remains in limbo. Indian Airlines' Rs 10,089 crore proposal to acquire additional aircraft, which was approved by its board in March 2002, lies in cold storage.

Air-India's Rs 10,000 crore fleet acquisition plan has met the same fate. Air-India had indicated that it planned to induct seven small capacity long range (SCLR) aircraft each in 2003-04 and 2004-05, besides inducting another 21 such aircraft between 2005 and 2007. The proposal is yet to get a government clearance.

When the two state-owned carriers were on the disinvestment roster, the finance ministry refused to inject equity into Indian Airlines. It pointed out that it made little sense for the government to infuse funds for acquiring additional fleet if the carrier was going to be privatised.

However, towards the end of the National Democratic Alliance government's tenure, there have been some initiatives to unlock the potential of the sector.

To begin with, there has been some movement in privatising the Delhi and Mumbai airports. While the Prime Minister's airports' corporatisation plan dates back to 1998, it has taken the government no less than six years to appoint an adviser for it.

The amendment of the Airports Authority of India Act, 1994, to facilitate private participation in airports, happened only last year. And with elections round the corner, the government looks set to miss the May 1 deadline set by Civil Aviation Minister Rajiv Pratap Rudy for identifying a joint venture partner for the Delhi and Mumbai airports.

Rudy had constituted a task force under former Cabinet Secretary Naresh Chandra for preparing a comprehensive report on the sector, to be used as inputs for the national civil aviation policy. While the task force submitted its report in December 2003, the Cabinet did not take it up.

The policy, expected to outline the government's stance on foreign investment, bilaterals, the disinvestment of Indian Airlines and Air-India, airports' privatisation and open skies, will now have to wait for the new government to take office.

In a significant move, the government recently allowed private airlines to fly abroad, besides halving the excise duty on aviation turbine fuel to 8 per cent and doing away with passenger fees and other charges. But this is hardly enough fuel to propel the civil aviation sector upwards.

Aviation report

Non-starters

• Divestment of Indian Airlines & Air-India
• Proper utilisation of bilaterals
• Fleet acquisition of Indian Airlines & Air-India

Late starters

• Privatisation of airports
• Allowing domestic airlines to fly abroad