Following in the footsteps of his father Madhavrao Scindia, Jyotiraditya Scindia has taken charge of the civil aviation ministry at a time when the industry is still reeling under the COVID-19 effect.
While the second wave of COVID-19 is now behind us, the Indian aviation sector continues to struggle with passenger traffic, fuel prices, rising debt levels, high taxation, and the uncertainty of when a recovery can be expected, given the nature of the pandemic and its wave of infections.
VK Singh will take over as the minister of state in the ministry. Here's a look at the challenges lying ahead of them:
Privatisation of debt-laden Air India: Scindia and Singh take charge when the government is making a last-ditch effort to sell its stake in Air India or shut down operations if it fails.
Coupled with the uncertainty around the number of interested parties and valuations for the national carrier, the ministers also face another hurdle as lawsuits against Air India threaten to not just seize the airline's assets but also shut down the divestment process.
Lawsuits by Cairn Energy and Devas Multimedia, both seeking to recover their dues from the Indian government, are attempting to seize Air India’s overseas assets.
On July 8, Cairn Energy said it had effectively seized Indian state-owned properties in Paris in order to recover the arbitration award in the tax dispute. The future of Alliance Air will also have to be charted out.
Airport privatisation: Another major step in the central government's divestment plan is airport privatisation. The civil aviation ministry is expected to privatise about 30-35 airports over the next five years.
However, the next round of privatisation may not be an easy task, given the continued disruptions due to the pandemic, and uncertainty surrounding the sustained passenger traffic at these airports.
The airports in Varanasi, Bhubaneshwar, Amritsar, Indore, Raipur and Trichy will be part of the next round of privatisation.
As these airports are located in smaller cities, the government is likely to face the uphill task of attracting sufficient bidders due to a fall in passenger traffic on these routes due to the outbreak of COVID-19.
There is still some uncertainty on the timelines for the rebound of traffic to pre-COVID levels at Tier-II and Tier-III locations.
Private players will be sceptical about aggressively bidding for these airports under the current circumstances as smaller airports allow limited alternative revenue- generation potential for private investors.
Pre-COVID levels the target: The ministers will also have to navigate the industry back to the pre-COVID level when the segment operated without a cap on capacity utilisation and floor limits on prices.
While the current limitations have been set to safeguard the interests of all airlines and prevent predatory pricing and market share gains, the industry will have to slowly move back to pre-COVID days.
Udan scheme: The viability and success of the government's regional connectivity scheme -- Udan -- also took a hit due to the outbreak of COVID-19 as most airlines shut down operations on these routes due to lack of passenger traffic.
As airlines continue to struggle with passenger traffic, it is unlikely that they will turn their attention to the regional flights anytime soon as demand on these routes is expected to remain limited.
ATF prices: The industry has been asking for lower Aviation Turbine Fuel (ATF) taxation for years now. At a time when crude prices are on the rise and the aviation industry is struggling with passenger traffic and profitability on routes, the taxation on fuel prices will be closely monitored by the industry and investors.
The industry has also requested for ATF to be included as a part of the Goods and Services Tax (GST) regime.
Read: 7 immediate challenges for Jyotiraditya Scindia, the new civil aviation minister
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