Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
General Studies 3:
Mobilization of resources, growth, development and employment
In News: Global Aviation Summit 2019 has been inaugurated with the theme ‘Flying for all-especially the next 6 Billion’. It offers stakeholders an opportunity to explore, deliberate and understand how technology-driven innovations will change air travel in the decades to come.
Key Statistics:
India is the seventh-largest country by area and the second-most populous with over 1.35 billion people. It is one of the fastest growing economies of the world and is likely to become the 5fth largest in 2019.
The Indian aviation market is on a high growth path. Total passenger traffic to, from and within India, during Apr-Nov 2018 grew by around 15% year on year as compared to around 6% globally.
India is now the seventh largest aviation market with 187 million passengers in FY 2017-18. It is expected to become the third largest by 2022.
India’s air passenger traffic is expected to grow six-fold to 1.1 billion and the number of operational airports increase to around 200 in 2040, according to Ministry of Civil Aviation’s vision document released.
While most of the airports’ passenger capacity will saturate in the next 15 years, India will have to nearly double the count from 99 to 200. India will need 200 airports and an investment of $40-50 billion to handle at least 1.1 billion passengers flying to, from and within the country.
Is India an emerging “aviation power”?
The Indian aviation sector is the fastest growing in the world with a growth rate of 20 per cent a year. But despite this 20 per cent growth, we have only 3-3.5 per cent of population flying, signifying great potential to grow further.
A task force has been set up, under National Civil Aircraft Development (NCAD) programme, to chalk out plan for indigenous aircraft, helicopters and associated equipment manufacturing. With an aim to promote India as a global aircraft manufacturing hub, the task force is expected to set up a special purpose vehicle (SPV) with an investment of $ 1.4 billion.
To achieve the target, the task force will identify technologies where India can pioneer in, giving SEZ status to aero-clusters, allowing 100 percent foreign direct investment (FDI), through automatic route, for investments by OEMs and Tier 1 manufacturers in defence aeronautical manufacturing, skill development, etc.
With the right policies and a relentless focus on execution, India can surprise the world by not just meeting but exceeding the Vision 2040 targets. As per the document initiatives like Nabh Nirman (for airport capacity augmentation), Digi Yatra (for paperless travel) and AirSewa (for online passenger grievance redressal) are bringing in radical changes.
While India is a “price sensitive” market, gradual rise in per capita incomes, increased (perceived) value of ‘time’, propensity for leisure and tourism will lead to more and more Indians using airways as a medium to travel.
What’s holding back the Indian aviation sector?
Rising fuel prices and the depreciating rupee: Oil for the airline industry is an important variable cost. As the price for oil has shot up, it had led to difficulties for airlines as they have not been able to absorb in the short term due to their business model.
Airlines’ inability to balance volume and value: The suffering for the sector is not a new one altogether. Over time, checks and balances should have been built in the system to absorb price shocks. The sector is confused as a whole on whether they want more volume or should they concentrate on a feasible plan that will help them keep their house in order.
India’s airlines have been trying so hard to capture market share that they’ve lost focus on making money. Indian aviation companies have been unable to value sustainability over volumes.
Inability to come up with a currency policy: No airlines company has been able to devise a credible currency policy to protect them against sharp currency movements.
The Way Ahead
India needs to
Become a huge provider of trained manpower for aviation in terms of engineers and pilots and even cabin crew as we Indians have a traditional service mentality
Become a huge exporter of services as well, in terms of maintenance, repairs, and overhauls (MRO) services and other things
Usher in amendments to Land Acquisition, Rehabilitation and Restructuring Act, 2013 and adopt “land-pooling” techniques to develop newer airports.
Levy a lower Goods and Services Tax (GST) reasoning that “taxes add pressure on the airline’s bottom line”, thus aviation turbine fuel (ATF) needs to be brought under GST “at the earliest”.
Airlines must try to reduce dependence on ATF by adopting biofuels and explore issuing masala bonds to raise funds for themselves.
The air cargo will reach 17 million MT per annum by 2040, up from 3.35 million MT per annum in 2018. This will need setting up of Air Cargo Logistics Promotion Board (ACLPB) to enable time-bound implementation of policies, establishing free trade warehousing facilities at the airports, setting up Air Freight Station (AFS) and putting in place Risk Management System (RMS) to minimise congestion. There is a need for development of low frill cargo airports and augmentation of tier II/III airports to avoid congestion at metro airports.
Aviation Financing: In the wake of falling rupee, airlines may not be able to continue with Sale and Leaseback (SLB) model due to reduced margins (on account of expensive dollar). Thus, the model will fail to be a sustainable model in the long run. Therefore, establishing a domestic aircraft finance industry will require a long term vision and significant policy reforms, especially on the taxation front.
The government may consider establishing a Nabh Nirman Fund (NNF) with a starting corpus of around $2 billion to support low traffic airports in their initial phases.
The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India’s civil aviation industry. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2025.
What are the highlights of the new civil aviation policy? Why was this policy the needed? Discuss.
India has witnessed tremendous growth in the civil aviation sector recently. What according to you is the significance of small airports and budget airlines for the economy? Examine.
Note:
DigiYatra:
An industry-led initiative coordinated by the Ministry of Civil Aviation in line with the Digital India vision to transform the nation into a digitally empowered society
Aims to transform the flying experience for passengers and position Indian Aviation amongst the most innovative aviation networks in the world
The passenger will have choice to opt for the facility.
AirSewa app: AirSewa app brings together all the stakeholders on a common platform to ensure timely and effective handling of customer grievances and to disseminate real-time data.
Ude Desh ka Aam Naagrik (UDAN) scheme
The Civil Aviation Ministry launched Regional Connectivity Scheme UDAN (Ude Desh ka Aam Nagrik) in 2017. UDAN is an innovative scheme to develop the regional aviation market. It is a market-based mechanism in which airlines bid for seat subsidies.
This first-of-its-kind scheme globally will create affordable yet economically viable and profitable flights on regional routes so that flying becomes affordable to the common man even in small towns.
