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Increased air connectivity is critical for trade, business and tourism, and leads to employment generation. The Civil Aviation sector thus must be viewed as a major contributor to national economic growth. According to the International Civil Aviation Organization (ICAO), $100 spent on air transport triggers $325 for the economy and 100 additional jobs in air transport results in 610 new jobs overall.
It is notable that 95 per cent of all international arrivals in India is by air. Besides, 40 per cent of all exports and imports in the country, by value, are carried by air.
To boost international air services, India has entered into Air Services Agreements (ASA) with 100 countries of which carriers of 50 countries are operating here. Indian carriers, however, due to various constraints, are operating in only 25 countries. Thus while foreign carriers are utilizing 70 per cent of their entitlements, Indian carriers are utilizing only 30 per cent of theirs.This asymmetry in utilization of entitlements has meant loss of economic opportunities for the country and introduction of commercial agreements that are resented by other countries. This has resulted in the demand far exceeding the supply and seat availability becoming a major constraint especially during the peak tourism seasons of the year.
In view of this, the Government has taken major initiatives in ‘Opening the Skies’. It has worked towards growth in passenger seats through bilaterals. It has adopted the ‘7+7 Policy’ wherein daily flights are being offered to any two airports in the country. There has been liberalization of the Tourist Charter Policy. There is a ‘Limited Open Sky Policy’ to meet peak season demands besides the ASEAN and Sri Lankan initiatives. The private airlines have also been allowed to operate into SAARC countries. In September 2004, after 20 years of stalemate, bilateral agreement with enhanced rights was signed with the United Kingdoms. This year, bilaterals with enhanced rights were also finalized with Australia, China, Germany, South Africa, Italy, UAE, Ethiopia, Saudi Arabia, South Korea, Slovakia, Finland, Maldives, Armenia, Syria, Tunisia and Kyrghyzstan.
Air Service Agreement was finalized with Brazil, the first ever with any country in South America. All this has resulted in greater choices for passengers in terms of increased capacity and connectivity as well as in competitive fares.
Passengers have always faced major problems in getting seats during winter peak season. To ease this out, the Government announced a ‘limited open sky 2004-2005 Policy’ for the period November 01, 2004 to March 31, 2005. This would enable airlines to mount additional services to their designated points of call. This announcement has been very significant. By mid November the Ministry of Civil Aviation has received 1,639 requests for slot allocation for the coming season. Over 2.5 lakh seats were added under this policy.
Under the ASEAN initiative, ten ASEAN countries have been offered daily flights to and from Mumbai, Delhi, Chennai and Kolkata. Besides, unlimited access has been given to 18 other identified tourists gateways. These rights have been granted on a reciprocal basis. Under the Srilankan initiative daily flights have been offered to and from Mumbai, Delhi, Chennai, Kolkata, Bangalore and Hyderbad.
The Government has been working towards liberalization of bilaterals. All countries having Air Services Agreement with India have been offered 7 flights from anyone airport and 7 from second airport. Beyond the ‘7+7’ offer, if a country requests for more flights, these are being considered on a case to case basis that is based on economic and tourism potential and diplomatic considerations. These offers are also on reciprocal basis.
There has been liberalization of Tourist Charters. Indian passport holders have been permitted to bring in tourist charters, outbound charters have also been permitted. These operations are permitted to any airport in India. The first leg and last leg of the journey in a series of stopovers, have been further liberalized.
The Government proposes to take further initiatives in this direction. It aims at optimum utilization of the country’s entitlements. This would be done by strengthening the national carriers and allowing private airlines to operate on more international routes. The Government has proposed to further liberalize bilateral rights in the interest of the country’s trade, commerce and tourism. It is also planning to set up a Low Cost subsidiary of Air India, phasing out mandated commercial agreements and making India a global aviation hub as well as an international aviation power.
As of now, present private airlines have been permitted to fly to SAARC countries only though the private carriers have requested for permission to fly on international routes. National carriers at present are not able to utilize more than one-third of available bilateral entitlements. As a result, foreign airlines are carrying a large chunk of the traffic to and from India. Fears of private domestic carriers becoming competitors of the national carriers on international routes have been allayed in such a situation.
The Government is drafting a new civil aviation policy to address these issues. It aims at making aviation more affordable, removing price monopolies in respect of Air Turbine Fuel (ATF), liberalizing bilaterals and creating Essential Air Services Fund (EASF). It would also help to provide subsidy support to essential services, encouraging promotion of regional airlines and providing world class infrastructure by organizational, managerial and financial restructuring of the Airports Authority of India. With constituting an Airport Economic Regulatory Authority (AERA), it would lay down tariff structures and performance standards. It would also look into issues related to airports like land encroachment in Mumbai, express highway and Metro Rail connectivity at Delhi, Mumbai and other major airports, and fiscal incentives at par with other infrastructure projects such as exemptions from customs and excise duties and tax holiday under Income Tax.
There has been a long felt need for rationalizing the ATF prices in the country that are among the highest in the world that is proving to be a major disincentive. In October 2004, the price of ATF Per KL was Rs. 30,800 for domestic flights while the international prices range from Rs. 13,600 to Rs. 19,300 per KL. ATF costs constitute 30 per cent of the operating cost of airlines in India as compared to 10-15 per cent in rest of the world. The Government is planning to adopt measures to bring the ATF prices under control. This would involve rationalizing the prices of PSU oil companies in line with international prices, dismantling monopoly in supply of ATF and categorization of ATF as ‘declared goods’ under CST Act to cap sales tax at 4 per cent for domestic flights.
With all these measures in force the country indeed can look towards more Open Skies’ and better international connectivity.
*Information Officer, PIB, New Delhi
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