Two years on, the aviation sector is ready for a take-off

Shweta Mungremoneycontrol.comAfter two years in the corner room, the BJP-led government seems to have worked slowly but steadily on putting in place at least a few vital reforms targeted in the draft National Civil Aviation Policy (NCAP).

The Indian aviation sector, the tenth largest in the world, has set itself some ambitious goals in the policy that was revised late last year. The goal to sell 50 crore domestic tickets and 20 crore international tickets by 2027 might be a stretch. But there was a winner, too. The Anti-Hijacking Bill 2016 which was passed in May has put passenger safety above all else.

A key reform is to have airlines fly to small towns so far not covered. If it is a one-hour hop away, you will be paying as little as Rs 2,500 soon. The ministry will be spending Rs 50-Rs 100 crore to clean up about 160 old airports and put the shine back on 10 of 25 non-functional airstrips. Result: This will ease congestion at other airports.

Maintenance, repair and overhaul (MRO) works are usually undertaken overseas by local airlines as not too many facilities are available locally. But they have been hit by higher customs duty. This policy has promised to offer a three-year exemption from the duty for airlines on imported testing equipment.

The thorn in the flesh of airlines has been the 5/20 rule which requires domestic airlines to own a minimum of 20 aircraft and have operated for five years in India to be able to fly overseas. As the Cabinet is expected to clear the NCAP, this rule will partially go away, with only the 20 aircraft limit staying.

The sweetener: the policy has also proposed to hike the FDI limit to over 50 percent. It remains to be seen if it comes through but it does not appear to be a priority right now.

POSITIVES

• Anti-Hijacking Bill passed
• MRO industry may soon get lower customs duty
• 5/20 norm might be eased
• Air India almost reached operational profitability. Although it is debatable whether it managed to do because of government initiatives.

NEGATIVES

• Privatisation of Air India still not done.
• Plans to build low-cost, no-frills airport could backfire. Some airports built under the previous government have now turned into ghost airports as they have been virtually abandoned.