Centre working to fix gaps in airlines  supply  chain: Jyotiraditya Scindia

The government is now open to approving a wet lease on an aircraft for a year from the current six months, Scindia said, adding the measures are being implemented as an exception and will be approved on a case-by-case basis. Scindia also said he expects the relaunch of Jet Airways next year. The airline is due for an important NCLT hearing on 29 November.

In an interview, Scindia, who also oversees the steel ministry, said domestic steel producers would regain footprint in overseas markets after the export levy on the alloy was lifted. He said the levy was removed as the objective of imposing curbs on exports was achieved. Edited excerpts:

The domestic air passenger traffic has crossed the 400,000 level over the past two days. What is your reading of the current level and further growth potential?

Very clearly, this is evidence that demand has not only recovered, but also new demand has been generated. If you look at our numbers in prior years, before 2013-14, this sector was dominated by travel from metros, tier-I and, maximum, a sprinkling of tier-II cities. Today, we have gone into tier-II and -III markets, which is creating new demand for the sector. We had close to 400 planes in 2013-14, we have about 700 now and, hopefully, we will add 100-125 planes per year. During 2019-20, there were around 200 million air passengers annually. So within the next 5-6 years, the market is going to reach 400 million in terms of total numbers. That is the potential that is before us.

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But supply chain issues have disrupted aircraft induction programmes.

A bit of a strange conundrum has occurred in the market. From an industry that was going through pretty much “starvation" as far as customers were concerned when all planes were on the ground during covid, suddenly you have a flood and the very fact that today you don’t have enough planes worldwide that are available, so one of the steps that I have taken is opened up the wet-leasing market and taking it to a 6+6 regime for one year at least so as to allow this bridging to take place between the immediate and the medium term. So, an intermediate step has been put in place to allow that bridging to happen until the capacity of our domestic airlines grows. A lot of our airlines have very expansive fleet acquisition programmes, including Air India, Vistara and others. I think that this is going to be one of the fastest-growing markets in the world from a civil aviation perspective.

So, this 6+6 arrangement will stay until the supply chain issues are resolved?

It is not a blanket approval; it is a proposal-to-proposal approval. When you apply, you submit a very clear plan as to what is the period you are looking for, where are the routes you are flying in this interim period or the stop-gap period, and then that permission is given for 6+6 on the basis of that, so if you make the commitment from you will be there that your planes will come in and therefore you will not need that wet-lease requirement (thereafter).

Do you think Indian airlines should induct wide-body aircraft?

Absolutely. I have been saying that from day one. You need to cast your net far and wide. We have a very robust domestic market and robust connectivity. Where we are very strong as a market is the mid-market which is the large narrow-bodied fleet, but you got to go upwards in the long-haul wide-body, and you have got to go downwards into the penetration for the last mile connectivity for smaller aircraft as well.

There has been a rise in airfares. Do you think it is going out of the common man’s budget?

It is a free market. The market decides the prices. Having said that, there are certain levers which come in intermittently. We are today in one of the busiest seasons, and, therefore, there is a demand-supply chain, and a demand-supply issue almost certainly does result in pricing. You have seen such an exponential rise in demand; suddenly, you have gone to a surplus in terms of demand coming in. That exponential rise was internationally not thought of. The third factor, which is the elephant in the room, is the whole issue of aviation turbine fuel (ATF). The fact is prior to covid 2019-20, ATF was roughly around ₹50,000 per kilo litre. That price has gone up 2.5 times today. If you look at the cost structure of an airline, almost 50% of the cost is the price of fuel, so that itself has a huge impact.

What is being done to assuage the concerns over fuel costs?

There were only 12 states in July 2021 that had VAT (value-added tax) on ATF between 1-4%, and almost about 24 states had VAT on ATF at 20-30%; we have moved 16 states from this basket of 24 to 1-4% regime, so now we have 28 states between 1-4% and only eight states left in the regime of 20-30%; and so I am thanking the 16 states that have moved over, and I am pleading with the balance eight states to also move over to this regime because the multiplier effect of the civil aviation. When J&K reduced VAT on jet fuel, Srinagar saw a 360% rise in refuelling within two weeks.

What is your view on Jet Airways’ relaunch?

They got their approval from NCLT in 2021, and they got the clearance from us for the air operator licence in May 2022; there are discissions internally with their lenders and consortium for their aircraft, but I think somewhere in 2023, hopefully, they will be online.

What about the pending issue of bringing ATF under the GST regime?

The GST process is the process through which you have multiple consultations with all members of the GST Council. This a process that will take its own time.

What is the update on the public-private partnership for more airports and the divestment of Alliance Air?

There are 11 airports under it, and the process is on. We are pursuing it, and it will be completed within the time that we have set for ourselves. That is pretty much on track. As far as Alliance Air is concerned, it is clear that we are going in for divestment and the process is on.

The reason for the export duty on steel was soaring prices in the domestic market. Will the government impose a windfall tax again on steel if prices rise?

Let us understand that the export duty levied on steel in May was for a reason and it helped achieve that objective. The commodity cycle follows a crest and trough pattern, and in this, steel demand and prices reached their zenith around June or July this year. The situation today is that raw material prices have dropped substantially. Coking coal prices, a prime input in steel making, have gone down from $600 to $300, and iron ore prices have come off by 15%. Out of 9 HSN codes for steel, including two of stainless steel and seven finished steel, prices have come off between 19-24%. So after a deep round of consultations and discussions with all stakeholders, where the seasonality of steel demand and prices and historical volatility in commodity prices were also discussed, a decision was taken on 19 November to remove the export levy.

With the duty out of the way, are steel companies expected to regain the export markets where they increased supplies during the covid period?

I am confident that domestic steel companies, both in the private and public sectors, will regain their export footprint in days to come. I say days to come because steel internationally is going through a very weak demand cycle both from European and American perspectives, as well as the Chinese perspective, and a recessionary environment is emerging. What is good here is that the domestic steel demand continues to remain robust. In fact, India is the only country in the world where there is double-digit demand at over 10.6%.

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