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Business News/ Politics / Policy/  Fiscal snags delay new aviation policy
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Fiscal snags delay new aviation policy

Aviation secretary Rajiv Nayan Choubey says the policy, expected to clarify 5/20 rule, will offer a level playing field to all airlines

An Etihad Boeing 777 freighter and other aircraft on display at the India Aviation 2016 air show at Begumpet Airport in Hyderabad on Wednesday. Photo: AFPPremium
An Etihad Boeing 777 freighter and other aircraft on display at the India Aviation 2016 air show at Begumpet Airport in Hyderabad on Wednesday. Photo: AFP

Hyderabad: The new aviation policy which was expected to kick in by April has been delayed pending clearances on several issues by the finance ministry.

The civil aviation ministry was expected to implement the policy by the beginning of the next fiscal year after the Cabinet’s approval.

Union civil aviation secretary Rajiv Nayan Choubey said the policy has been further delayed owing to “fiscal issues".

“We expect to move the cabinet note by the end of the month. It will take another three weeks for inter-ministerial comments," he said on the sidelines of India Aviation show in Hyderabad.

Some of the issues have been cleared by the finance ministry, while work is on to clear some others.

The aviation policy was first presented in November 2014 and then revised in October 2015 and put out for public comments.

It has attracted strong reactions and lobbying from older airlines such as IndiGo (InterGlobe Aviation Ltd), Jet Airways (India) Ltd, SpiceJet Ltd, GoAir and new entrants such as Vistara and AirAsia. The latter want a relaxation in the policy, allowing them to fly abroad; the older airlines oppose the relaxation.

The aviation ministry is expected to take a decision on the controversial 5/20 rule in the policy. The rule says an airline needs to fly five years in the domestic market and have a fleet of 20 aircraft before it can fly abroad.

Choubey said there would be a level-playing field for all airlines and the government would see to it that no wrong is done to anyone. He said there are 15 variations of what to do with the 5/20 rule that the government is considering.

“We have come to a reasonable understanding on the 5/20 rule as to what is the best way forward," he said, adding he can’t go into specifics as the policy is yet to be approved by the cabinet.

The policy, he said, will be “unambiguous".

He said there are about 22 issues in the aviation policy including a proposal to sell seats for about 2,500 on short-haul sectors for which viability-gap funding will be provided. He maintained a 2% cess may be collected on air tickets to subsidize those that run these short-haul sectors.

He said currently only about 70 million people fly in India locally while the middle class population is about 350 million. These 70 million fly to 75 airports in India. Nearly 30 airports are lying unused and there are hundreds more that can be developed if fares are affordable, he said.

Once the regional connectivity proposal that is part of the policy is cleared, the ministry expects 50 airports to host flights each year.

“If 5/20 goes or stays it’s not going to change the landscape of the country, this will," he said.

State-owned Airports Authority of India has been asked to appoint a consulting firm to iron out the procedure to handle this subsidy.

On Air India, the secretary said he expects the airline to turn around 18 months before the 2020 target if oil prices remain low.

The airline has for the first time reported an operating profit in about 10 years, he said.

To a question on why debt-laden Air India is not getting the same treatment as Kingfisher Airlines Ltd, aviation minister Ashok Gajjapati Raju said they were not comparable.

“I don’t think in Air India somebody cheated somebody," he said. “And nobody is hiding it. Let’s not compare Air India to other airlines."

Meanwhile, the Hyderabad aviation show saw the who’s who of the industry in attendance. Among those present on Wednesday, included Qatar Airways’ chief executive officer Akbar Al Baker, AirAsia Group founder Tony Fernandes and several ambassadors.

It was also the first time that the three main Middle Eastern airlines—Emirates, Etihad and Qatar—had brought their jumbo and long-haul jets to the show.

President Pranab Mukherjee inaugurated the air show on Wednesday.

“As India is at the threshold of taking a major leap in the aviation sector, this event is well timed and resonates well our latest policy initiatives of ‘Make in India’, ‘Stand up India’ and ‘Start Up India’," Mukherjee said. “It is for the global giants to seize this opportunity and take lead to forge long-term partnerships."

Mukherjee toured the entire show on a golf cart with minister Raju and was greeted by dozens of airline executives.

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Published: 16 Mar 2016, 10:29 AM IST
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