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India opens up its skies

December 27, 2003 12:00 IST

Opening of the skies to foreign and private domestic airlines and liberalisation of the entire aviation sector in the country will mark the New Year, as the government worked through 2003 to unveil a revolutionary Civil Aviation Policy to enhance competition and make flying easier and cheaper.

These major initiatives were watershed developments in India's aviation history this year when the world celebrated the centenary of man taking to the sky.

Trouble over Indian skies
Arm in arm with ASEAN
Open sky to come with its riders

Even as a high-level committee appointed by the civil aviation ministry submitted a roadmap for the aviation sector for the next decade, the government this month decided to allow private domestic carriers to fly to SAARC countries, including Pakistan, and give freer access to airlines from SAARC and the ASEAN nations to Indian destinations.

Sky's the Limit

Govt announces open-sky policy

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Maharaja flies to Shanghai

Mumbai, Delhi airports privatisation plan hits roadblock

No-frills Air Deccan starts operation

49 per cent FDI in domestic airlines likely

India and Pakistan also decided to resume from January bilateral aviation links, which were snapped following the terrorist attack on Parliament on December 13, 2001.

The path-breaking offer to the airlines of the ASEAN nations to fly into four Indian metros and 18 major tourist destinations without any restriction was made by Prime Minister Atal Bihari Vajpayee at the India-ASEAN summit in Bali, Indonesia.

During the year, the ministry saw Shahnawaz Hussain passing on the mantle to Rajiv Pratap Rudy, though in the process the civil aviation portfolio was downgraded from the Cabinet rank to the Minister of State status.

There was not much forward movement on the implementation of the government's Budget promise of starting work on privatising and modernising the airports at Mumbai and Delhi.

In fact, after shortlisting three bidders for the job of financial consultant to oversee the privatisation process, an empowered Group of Minister decided to go in for a re-bid.

The year that passed by also did not see much progress in the fleet acquisition programmes of Indian Airlines and Air-India.

While the domestic carrier's plans to acquire 43 aircraft at a cost of over Rs 10,000 crore (Rs 100 billion) went through two meetings of pre-public investment board, Air-India board was yet to submit its proposal to the government to buy 28 planes at a cost of Rs 10,589 crore (Rs 105.89 billion).

The only positive note on the fleet expansion front was the induction of four turboprop 50-seater ATR-42-320 aircraft for IA subsidiary Alliance Air's operations in the northeast, with an annual financial assistance of Rs 35 crore (Rs 350 million) from Department of Development of the Northeast Region.

The not-so-positive scenario on fleet acquisition of IA and AI emerged at a time when all major global airlines were considering or implementing plans to launch low cost, no-frill budget airlines and expanding and strengthening their short-haul networks.

The government also decided to purchase five 19-seater executive jets from Brazilian firm, Embraer, for VIP travel. While four of them would be under the Indian Air Force, one would remain with the Border Security Force.

The high-level Naresh Chandra Committee, whose landmark recommendations are likely to form the basis of the new Civil Aviation Policy, suggested 49 per cent FDI in the domestic and international scheduled carriers and allowed private Indian carriers to fly to foreign destinations.

It also recommended up to 100 per cent FDI in helicopter operations, including investment by foreign airlines.

While recommending expeditious steps to privatise Delhi and Mumbai airports, it also suggested IA and A-I being once again put on the divestment list and the process speeded up.

In order to make flying affordable, the panel suggested lowering of taxes on Aviation Turbine Fuel and doing away with all air travel taxes by imposing a flat five per cent ad valorem cess on airfare. These taxes constitute over a quarter of the total fare.

Besides creation of an Aviation Economic Regulatory Authority, the panel also recommended setting up of an essential air services fund to support essential but uneconomic operations like in the northeast, Leh and the island territories of Andamans and Lakshadweep.

These recommendations are likely to form part of the policy, which is to be placed before the Union Cabinet in the first week of January. The policy would also be tabled in Parliament in the Budget Session.

On the domestic airfare front, the IA and private carriers, which had introduced cheaper advance purchase fare schemes primarily to attract upper-class rail travellers, hiked these special fares as soon as the winter peak travel season began.

The process of privatisation of Delhi and Mumbai airports suffered a setback when, after shortlisting three firms for appointing a financial consultant to oversee this entire process, the empowered GoM decided to call for fresh bids due to technical reasons.

The GoM was set up to decide the detailed modalities of the privatisation and modernisation process of these airports, including the design parameters and bid evaluation criteria.

Based on these criteria, a joint venture partner is to be selected. The successful bidder would form a JV with Airports Authority of India, and on completion of the modalities, the two airports would be handed over to the JV firm in which AAI would hold 26 per cent with the rest held by private partner.

In order to beef up aviation security but keep it customer-friendly, the ministry undertook training of CISF personnel who have already been deployed in almost all major airports.

In this context, the Bureau of Civil Aviation Security was also in talks with concerned agencies, including Intelligence Bureau, to devise latest modes to prevent hijacks or use of aircraft as a weapon as was witnessed during the 9/11 terror strikes in the United States.

A consensus was also reached to create a special security committee, which would take over in the event of a hijack and function under the Crisis Management Group of Ministers and officials.

However, the major recommendations emerging out of these discussions, when finalised, would have to be cleared by the Cabinet Committee on Security.

A major step to enhance airspace capacity to accommodate more aircraft was also taken this year with the Directorate General of Civil Aviation reducing the vertical distance between two aircraft and two air corridors.

Based on the recommendations of the International Civil Aviation Organisation, the DGCA in November introduced the Reduced Vertical Separation Minima of 1,000 feet for aircraft flying at a height of between 29,000 and 41,000 feet over the Indian airspace.

On its Golden Jubilee year, IA succeeded in lowering its losses hoping to break even this fiscal, after having incurred a loss of Rs 245 crore (Rs 2.45 billion) last financial year primarily due to higher fuel prices because of sales tax and excise duty charged by the state governments.

Air-India faced some labour trouble but handled it sternly by suspending 12 pilots for their refusal to fly to destinations affected by Severe Acute Respiratory Syndrome and de-recognised the Indian Pilots Guild. Moves are now on in the government to take pilots out of the purview of labour laws.

The Supreme Court also came in to stand by A-I's decision to reduce the flying age of air hostesses from 58 to 50 years.

While the year 2003 did not see much material progress in the Indian aviation sector, the groundwork has been laid to unfold an absolutely new scenario in the New Year.
Amitabha Roychowdhury in New Delhi