<b>Anjuli Bhargava:</b> Keep it simple, please

Try to resolve the real issues facing aviation instead of tinkering with existing rules

As if things were not complicated enough, the Ministry of Civil Aviation has come up with a new draft proposal that seeks to link domestic airlines flying overseas (5/20 rule) and flying to uneconomic domestic routes (route dispersal guidelines) within India. Suffice to say that the new formula will add to the confusion rather than simplifying matters. I strongly suggest policymakers consign the draft to the dustbin and think afresh.

Let's look at the two issues. The route dispersal guidelines force domestic airlines to fly on uneconomic routes, often with aircraft that will never be viable on the route proposed. Moreover, many of these routes that started as uneconomic have now developed into reasonably lucrative ones.
 

I'd say scrap the whole thing. If the government wants certain uneconomic routes (these might keep changing as the country develops) covered, there are at least three better and simpler ways of doing it. One, hold a public auction and grant the route to whoever demands the lowest subsidy. Create a fund - through a special charge - to finance this subsidy. Two, encourage smaller regional airlines with smaller aircraft that can serve these routes. And three, ask Air India to step in. Since the national carrier is not going anywhere in a hurry - it is unlikely to be privatised and is financed by taxpayer money in any case - let it do this job in addition to its existing plethora of evacuations, relief operations and pilgrimages.

To come to the second issue of 5/20 (airlines must have five years of domestic flying and 20 aircraft in their fleet before they fly overseas), it is more complicated. In general, I would say the 5/20 rule has no basis to stand. Few countries have such rules and even existing domestic carriers are unable to justify their existence in isolation.

Having said that, here's why this issue is not as simple as it looks. Several domestic airlines did have to adhere to this rule. Even as they watched Emirates, Singapore Airlines and other foreign airlines fly in and out of India unfettered, and mint money, our own domestic carriers had to wait for the green signal. Along with this, these domestic airlines had to meet the social obligations of flying uneconomic routes. Taxes and the environment in India added to their burden. The fact that we have seen at least 8-10 carriers sink with no trace since we allowed private operators is testimony to what the airlines have had to contend with.

There is another factor to bear in mind. In 2012, when the government allowed foreign airlines to invest in Indian carriers, the intention was really to shore up finances of existing domestic airlines. But as things have turned out, most of the foreign investment that has come in is not in existing carriers, but by way of new foreign airlines setting up ventures with domestic partners. In the one case where investment came into an existing airline - Jet Airways - no one can say that the effective control remains in Indian hands. Jet, by and large, is controlled, run and managed by its foreign partner now.

Now, if these new airlines have a marginal domestic presence but fly overseas extensively (making a mockery of the bilateral agreements), then certainly none of the objectives of government policies would have been served. Neither do we help the struggling domestic airlines nor do we grow the domestic network. When foreign airline investment is involved in domestic carriers, it is hard to discern whether they are indeed flying as Indian carriers or as foreign carriers under the garb of being Indian.

So, on this, I have to agree that it might perhaps be best to let sleeping dogs lie. The 5/20 rule reflected poor judgement, but this might not be the best moment to do away with it either. And don't try and link the two through these complicated domestic flying credits and so on.

What boggles my mind is why the government doesn't come up with ideas to resolve the real issues facing the sector. But that requires a separate column. I will elaborate on it next time.