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Under existing rules, Indian carriers wanting to fly on international routes need to have a fleet of at least 20 aircraft and must have operated for at least five years (known as the 5/20 rule).
"A Cabinet note to scrap the 5/20 rule has already been sent by the civil aviation ministry. It is expected to be taken up and cleared at the Cabinet meeting on Wednesday," said a source.
It would be the last policy change to be effected by the civil aviation ministry before elections are declared later this week.
The move has already come under criticism with the Federation of Indian Airlines (FIA) writing to civil aviation secretary Ashok Lavasa in January: "Considering that all airlines in the process of fulfilling their obligation have incurred substantial losses through domestic operations, it would be unacceptable for the government to now consider revising the policy by the removal of the 5/20 rule in order to benefit the international airlines' joint ventures, which are under consideration and approval."
Currently, all existing Indian airlines, except GoAir, meet the requirements necessary to fly abroad. Wadias-promoted GoAir has a fleet of 18 aircraft and it plans to add another two by the middle of this year, which will enable it to commence international operations.
The move to abolish the 5/20 rule will benefit Tata-Singapore Airline (SIA) and AirAsia, which are both expected to start operations later this year. A senior official said that the purpose of the government in effecting the policy change was to put in place an "enabling structure for the industry in future".
After the abolition of the 5/20 rule, airlines will require permission from the Directorate-General of Civil Aviation (DGCA) to start international flights. The DGCA will give permission depending on the airline's safety record and financial capability. It was in January this year that Civil Aviation Minister Ajit Singh said his ministry was in the process of framing a Cabinet note to seek government approval for "scrapping" the regulation within a month.
"The 5/20 norm for flying international will be completely abolished. We are preparing a Cabinet note on this. Since everything needs to be completed before February-end (when the code of conduct for the general elections comes into force), we will do it before that," Singh had said.
This proposal has already been endorsed by finance minister P Chidambaram, who had said in Washington in October 2013 that he would support the move if the civil aviation ministry moved a Cabinet note to amend the rules.
"5/20 is an anachronistic, discriminatory and anti-competition policy… This rule works against the interest of Indian carriers. Today, a one-day old airline registered abroad with a one-aircraft fleet can fly into India, no holds barred. Its (5/20 rule's) removal by MoCA will add to the attractiveness of the Indian aviation sector", said Amber Dubey, partner and head (aerospace and defence) at global consultancy KPMG.
The management of both airline ventures announced by Tata Sons last year has evinced interest in starting international operations from India. Tata Sons, which tied up with SIA in September last year to launch a full-service carrier in India, with an initial investment of $100 million, has said it wants to operate international flights from India if it gets a government approval.
Tony Fernandes, CEO, AirAsia, has also been vocal in his criticism of the 5/20 rule. In a media briefing in New Delhi in July last year, Fernandes had said the rule made no sense and that India was the only country where such a rule existed. "A one-plane operation like AirAsia Malaysia can fly into India, but an airline with (less than) 20 planes cannot fly out. That's a disadvantage to the (Indian) airline."
Pointing out that India could be a hub for international travel, he had said: "India is strategically located. And we can operate flights from the southern part of the country, within a four-hour circle, to destinations in Africa and on the Gulf routes like Doha, Nairobi, Maldives, Karachi, Bangladesh and some Chinese cities. It is bizarre that the government has a regulation in place that allows (only) airlines with five years of operations and a fleet of 20 aircraft to fly international."
In a recent report, aviation advisory firm Centre for Asia Pacific Aviation described the 5/20 rule as "the most damaging and discriminatory".
