Limited skies

BS OPINION

The ink is barely dry on Prime Minister Atal Bihari Vajpayee's accord with Asean, and there are already various unofficial statements from unnamed officials on how they plan to limit the PM's promise of an 'open sky policy'.

Others are quick to point out that the only way the Asean countries can get more flights into and out of India is if they grant Indian flights reciprocal access. While that's fair enough, there's a rider attached: since Air- India is not allowed to buy planes, and clearly cannot fly the extra bilaterals even if they are granted, there's no point allowing more Asean flights into the country.

This, of course, is the traditional way of looking at things "" some years ago, there was a furious fight between the disinvestment ministry and the aviation ministry, as the latter's move to negotiate more bilaterals was seen as a way to reduce the market value of the then soon-to-be-privatised Air-India.

The fact, however, is that if India has to develop as a vibrant tourism destination, apart from other things like world-class airports, it needs a lot more flights into the country, and at lower fares. And that's what the open skies policy will do.

Besides, if neither Air-India nor Indian Airlines has the flights to fly to Asean countries, well, the rights can be given to the private airlines, Jet and Sahara.

Alternately, as has been done in the past, Air-India can extract 'code share' or other rentals from these airlines wanting to fly more flights into and out of the country. So, the riders about Air-India not having enough planes, and this being a good enough reason to attach strings to the PM's promise, don't really amount to much in real terms.

The basic point about the open skies policy, as with the other agreements on free trade with Asean, is that it will increase competition, and that can only be a good thing in terms of forcing Indian airlines to become more cost-efficient.

Of course, this can only happen if the government reduces the distortions its policies have introduced in the market as well. Last year, for instance, Indian Airlines lost around Rs 200 crore on uneconomic flights (like those in the North-east) that it was forced to make because of political considerations.

Similarly, thanks to each state government trying to milk as much tax as possible, Indian airlines pay 50-100 per cent more for fuel costs when compared to global airlines.

So, unless this is fixed, a Thai jet coming into India will always be cheaper than a Sahara jet flying to Thailand "" unless of course, Sahara or whichever airline gets to fly the new routes, is able to buy all its fuel in Thailand. Fixing this, of course, is not too difficult "" as in the case of other goods like coal and steel, the government just has to declare aviation fuel as something called a 'declared good' and sales taxes on it cannot exceed 4 per cent anywhere in the country.

This, of course, is just one instance of what needs to be fixed, and there are a host of other things that need to be done to give Indian airlines a level playing field. But the answer lies in fixing them, not in restricting the market.