Govt’s altered aviation policy may lead to 15k job losses

Excerpts from India Business Hour on CNBC-TV18 Watch the full show » Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

The government in its 100-day agenda may not make way for foreign airlines to buy stake in domestic carriers. But the National Aviation Policy and the controversial ground handling policy are on the block. The altered policy could lead to 15,000 people losing their jobs, and also has security implications.

Here is a verbatim transcript of Mehak Kasbekar's comments on CNBC-TV18. Also watch the accompanying video.

The Civil Aviation Ministry is gearing up for a flurry of activity and the first 100 days could well be chock-a-bloc with developments.

For starters, the government is expected to clear the National Aviation Policy, which has been pending with the Group of Ministers since January 2008. In a note to the cabinet secretary, the Civil Aviation Ministry is learnt to have recommended finalising the policy.

Second, the amendments to the controversial ground handling policy are also expected to come through, since the UPA Government's six-month extension for the same ends on June 30. The altered policy could lead to 15,000 people losing their jobs, and also has security implications.

The government is also likely to infuse close to Rs 4,000 crores worth of soft loans and equity into Air India's holding company NACIL. This is to help the airline offset losses, which are seen doubling past Rs 4,000 crores this financial year.

However, the domestic aviation sector may have to wait longer than expected for the government to relax the FDI rules governing the sector. The 100-day agenda makes no mention of foreign airlines buying a stake in domestic carriers. This proposal, experts say, is of immense importance to the sector that has faced a turbulent 2008, and is expected to post losses of over Rs 10,000 crore in FY10. 

The ministry has also recommended that the government clear 13 pending bi-lateral requests, along with the long-pending India-Asia Open Sky Proposal. Goa's Dabholim airport may also be kept functional, even after GOA's new Greenfield airport becomes operational.

Sources say there are more issues, which don't appear on the ministry's immediate plan of action, that could be dealt with like a reduction in tax on Aviation Turbine Fuel, slashing of  service charges on upper class air travel, clearing more licenses and providing a legal framework for preventing a monopoly in the sector.