UDAN Faces Legal Hiccups

The government had in June this year announced its civil aviation policy. Its fallout has been – Airlines will have to pay Rs 7,500 for every flight up to 1,000 km, Rs 8,000 for those between 1,000 and 1,500 km and Rs 8,500 above 1,500 km.

As per the Union civil aviation minister Jayant Sinha, the national civil aviation policy, including the Regional Air Connectivity Scheme (RCS), is expected to increase the number of functional airports in the country to 150-200 in the next few years; there is going to be a massive increase in airport capacity in the country with an expected investment of Rs 1,50,000 – 1,70,000 million by the AAI in the up gradation and modernization of its airdromes.

According to data twitted by the Minister, the aviation sector served 8.67 million people in October 2016. In contrast, the sector had provided services to 7.03 million people in October 2015. The total number of air travelers between January and October 2016 increased to 81.37 million, from little over 66.06 million during the same time period in 2015.

Noting that the aviation sector in India is changing very dramatically, Sinha added, “There is going to be a massive increase in airports capacity in the country.”

At present there are 75 functional airports in the country. The RCS is now being envisaged with a view to connect smaller cities with the metros which will result in more number of airports coming up.

The Directorate General of Civil Aviation (DGCA) has notified a new cess applicable on domestic flights in order to create a corpus for UDAN under RCS. It has been marked to all airlines and posted on the DGCA’s website.

This move has, however, been challenged in court by the airlines despite apparently knowing that their plea may not be entertained. The group Federation of Indian Airlines (FIA) comprising IndiGo, Jet Airways, SpiceJet and GoAir has filed a petition challenging the cess in the Delhi high court. 

The notification reads –
Airlines will pay
– Rs 7,500 for every flight up to 1,000 km,
– Rs 8,000 for flights between 1,000 and 1,500 km and
– Rs 8,500 for flights over 1,500 km.

The airlines are naturally expected to pass on the cost of the new UDAN charge to their passengers, but they are not sure whether they can do so under the law. If passed on, the cess would come to about Rs 50 per passenger on a 180-seater Airbus A320 plane —flown by most of these budget airlines.

“The central government has decided to impose a levy on the following scheduled flights being operated within India at the rates indicated against them to fund regional air connectivity fund created under powers conferred under Rule 88-B of the Aircraft Rules 1937,” DGCA Director General B.S. Bhullar said.

The current rules already mandate that airlines should mark a certain percentage of their total flights for under served areas. Bhullar said those flights would be exempted from the new levy.

Operators of smaller planes such as ATRs, (operated by Air India and Jet Airways) and Bombardier Q400s (operated by SpiceJet) which are below the take-off mass of 40,000 kg, need not pay this levy. These planes mostly fly short-haul routes.

Flights started by operators in future using funds from the UDAN cess will also be exempted from these charges.

The Airports Authority of India has been designated as the nodal agency to monitor the collection of funds from airline operators.

The funds will also be open to audit by the Comptroller and Auditor General of India (CAG)

The ministry expects an estimated Rs 4,000 million to be collected annually as a result of this scheme. The fare for a one-hour journey of about 500 km on a fixed-wing aircraft or a 30-minute journey on a helicopter has been capped at Rs 2,500, with proportionate pricing for routes of different lengths and duration.

The court, however, has declined to stay the imposition of the levy.

The ministry hopes that, if all goes well, a sum of Rs 4,000 million a year or so can be raised to feed the RCS. However, aviation analysts believe that if the ministry had properly conceptualized the non-aeronautical revenue arising out of over 150-200 new and revamped airports, more than Rs 14,000 million a year could have been raised. That would not have inconvenienced anybody; the air fares would have dropped further; and above all, the whole scheme could have been made self – reliant. There would have been no need of any sort of subsidised relief. 

FIA contends that the cess will be a huge burden on the financials of the airlines. As per FIA, the ministry of civil aviation did not have the authority to introduce the levy in this manner. It said the levy made up for the government’s share of the Regional Connectivity Fund (RCF) towards the public purpose of enhancing regional connectivity.

Thus, the Government’s ambitious much hyped Regional Air Connectivity Scheme is going to run on crutches which might not survive in the long run. This attitude of the government proves that the government knows very well that the scheme does not have any attractive inherent financial feasibility which may excite an entrepreneur. If one takes away the various sops and concessions given to RCS, apart from this levy, then one is left with only losses. Against this backdrop, several practical questions are being raised over the economical operation of the scheme. 

The next hearing is slated for 21 December.

Patna Airport Getting Saturated

Nowadays, Patna’s Jayaprakash Narayan International (JPNI) Airport is witnessing a bumper passenger flow trajectory.

Patna airport has registered a 21.9% increase in passenger flow in the first six months of 2016-17. Patna airport handled 9,40,405 passengers between April and September against 7,71,188 during the same period last year. In terms of monthly passenger movement, Patna airport handled 1,51,182 in September this year against 1,19,204 in the same month last year. The Airports Authority of India (AAI), disclosed these figures recently.

This phenomenal rise in air passenger traffic at Patna is attributed mainly to ever increasing number of Patna bound air travellers. “There is a large chunk of floating population in Bihar, which keeps travelling in and out of Patna,” JPNI airport director Rajendra Singh Lahauria told media. The airlines, too, notably IndiGo and Go Air, didn’t see any harm while introducing more number of flights with surprisingly low airfares which on various sectors have come down recently, making it well within the reach of the common man.

Increase in the number of daily flights operating from Patna in 2016 :-

IndiGo — from 3 in 2012-13 to 13.
GoAir — from 3 in 2012-13 to 6.

Total — from 10 in 2012-13 to 25.

The availability of more flights has resulted in competition among the various airlines which, in turn, has reduced the airfares on different sectors. At times, airfare on Patna-Delhi and Patna-Calcutta route is similar to AC class train fare.

Patna Airport

The average daily number of passengers at the terminal building stands at around 7,000. The total seating capacity of the passenger holding area is not more than 1000. “Considering the traffic of passengers and aircraft, the terminal building and the runway in Patna are one of the most saturated among all airports in the country,” said Lahauria.

It is in acknowledgement of the scarcity of space in the terminal building that the state government and the AAI are working on a scheme for the expansion of Patna Airport besides simultaneous operation of flights from the Bihta airbase. With the Secretariat tower on one end and a railway cabin on the other, nothing much could be done for the development of the existing airport.

Subject to clearance from the defense ministry, the Patna Airport is headed further west – towards Bihta – amid efforts for its development. The AAI board has agreed to transfer around 11 acres of its land at Anisabad to Bihar government in return of 13 acres of land of the state hangar, depot of Indian Oil Corporation (IOC) and 6.5 acres of land owned by Special Task Force (STF) adjacent to the airport. The additional land is proposed to be used for renovating the terminal building into a two-storey smart building capable of handling passengers through aerobridges.

0.33 Million High-end Jobs in Indian Civil Aviation by 2025

Civil Aviation Minister Ashok Gajapathi Raju
Civil Aviation Minister Ashok Gajapathi Raju

The new National Civil Aviation Policy (NCAP) aims to transform the aviation in India. As per the Civil Aviation Minister Ashok Gajapathi Raju, the NCAP will create about 0.33 million high end jobs in India in the field of civil aviation . It is the estimated direct additional employment requirement of the Civil Aviation sector by 2025. This will give a boost to the employment sector. 

“Apart from this a large number of jobs will get created in allied sector and in tourism sector too as the growth of the aviation is directly related to tourism. Tourism will get a huge boost through the upcoming new airports and new airlines,” he has said.  “All training in non-licensed category will conform to National Skill Qualification Framework standards. Ministry of Civil Aviation will provide full support to the Aviation Sector Skill Council and other similar organisations and agencies for imparting skills for the growing aviation industry. There are nearly 8,000 pilots holding CPL but who have not found any regular employment. MoCA will develop a scheme with budgetary support for type-rating of pilots. The detailed scheme will be worked out separately.” 

FDI norms liberalized.

Nine sectors have been thrown open to increased Foreign Direct Investment (FDI) and/or portfolio investment. There is an air of easy globalisation. It is generally in sectors where the entry of foreigners may not worry any domestic player of competition.

Economic Affairs Secretary Shaktikanta Das
Economic Affairs Secretary Shaktikanta Das

A certain positive in the FDI policy is that it is friendly to jobs.

As per Economic Affairs Secretary Shaktikanta Das, manufacturing and job generation will get a boost by the latest round of liberalisation in FDI norms that include doing away with dual clearances.

“With this FDI liberalisation, we expect manufacturing activity to come in…more activity in defence products. The driving force behind the whole thing is that all this investment should facilitate creation of jobs,” he told media.

He has welcomed the government’s move to approve 100% FDI in aviation, defence and e-commerce sectors, saying this initiative will boost employment.

“For civil aviation, this will be a very big game changer. A 100 percent FDI can come in. So, it will definitely assist the domestic aviation companies to strengthen themselves, to expand their network and also in the process create jobs for our youngsters in various capacities for repairs or as pilots or flight crew,” he told the media.

On FDI, the civil aviation secretary R.N. Choubey has said, “The government has flipped the coin.”

“Which country in the world is going to give them 22% growth rate? After all, the entire Gulf aviation sector… is built on the back of India’s strength. If that’s the case, why will they not come into India itself? If someone else is willing to put money in their country based on India’s business, then I can say it is even better, let them come, I open the doors of FDI, let them come and do business in India,” Choubey has stated.

The government is expecting big FDI inflows from West Asia in aviation. Air traffic to and from West Asia to India is critical for foreign airlines based in the Gulf.

The demand for flight services to key Gulf destinations from Tiruchi in India is so much that the Tiruchi Airport authorities have appealed to two Indian airlines to begin services in that sector and to operate flights in the domestic Tiruchi-Mumbai-Tiruchi sector as well.

The airport authorities conveyed their interest in this regard through separate letters forwarded to IndiGo and SpiceJet.

The request has been made at a time when there is a huge demand for operation of international flights to connect more West Asian countries from Tiruchi as well as to augment domestic connectivity. At present, Air India Express is the lone overseas carrier operating a daily service to Dubai.

If the expectations come true, it will mean a big infusion of money into the capital-starved domestic aviation sector, stimulating job opportunities and kick-starting the investment cycle in the economy.

Choubey said he has had interactions with several top international airlines operating in and out of India like Emirates, Qatar Airways who have evinced interest in investing in India’s aviation sector.

Industry welcomes FDI move.

Chandrajit Banerjee CII Director General
Chandrajit Banerjee, CII Director General

The government’s move to ease FDI norms in civil aviation, by permitting more investments under the automatic route will further help attract big investments and boost job creation. Chandrajit Banerjee CII Director General said, “Liberalisation of the FDI regulations reflects the government’s commitment to reforms and openness, and reassures investors that ease of doing business remains a high priority.” 

Terming the simplification of policy framework governing investments in strategic sectors like defence and aviation as a “huge positive for the economy”, Ficci Secretary General A Didar Singh said: “The Modi administration through these moves has once again highlighted that reform is a continuous process in order to capitalise on the potential India offers.”

Singh felt that “There is no doubt that India today is the most preferred investment destination in the world. While the attraction of our market is known to all, there is now even more reason for global investors to commit themselves for making and doing business in India”.

ASI and AAI sign MoU.

Aviation Strategies International (ASI), a Corporate Partner of the Royal Aeronautical Society,  recently signed a Memorandum of Understanding (MoU) with the Airports Authority of India(AAI), a government agency of the Ministry of Civil Aviation of India entrusted with the development, expansion and modernization of its air traffic services, passenger terminals, operational areas and cargo facilities.

Founded in 1998, ASI is recognized for providing strategic advice and competency development consulting services at the corporate level, in the field of civil aviation. Its multidisciplinary team of international aviation specialists offers objective, tailored recommendations that are aligned with industry best practice. ASI’s main offices are located in Montréal, with regional representations in Atlanta, Beijing, Melbourne and Ottawa.

AAI and ASI agree to work together through a broad cooperation framework to jointly implement world-class competency building initiatives that encompass training, research and technical cooperation. They will systematically address the professional development needs of AAI employees at all levels and will extend their NATS_building,_new_delhicooperation to the various training establishments of AAI, including the Indian Aviation Academy (NIAMAR), for the delivery of national, regional and international programs. They also plan to share their joint expertise and innovations in the development of human resources with industry stakeholders.

“The Indian aviation sector is growing at a phenomenal pace; one of the fastest in the world. AAI is poised to provide active leadership and make innovative professional contributions for the betterment of the aviation industry, both in India and globally. The new India National Civil Aviation policy provides an impetus for major investments in infrastructure and human capital over the coming years and we are indeed honoured to have been asked to actively support AAI’s goals by marshalling our expertise in the various targeted areas of excellence”, remarked Dr. Pierre Coutu, ASI’s President.

Dr. Pierre Coutu, ASI’s President.
Dr. Pierre Coutu, ASI’s President.

The new National Civil Aviation Policy aims to transform the aviation map of India by reviving numerous airports and airstrips that are either not operational or see little activity. As per the policy document, India has 450 airports and airstrips but only 75 have scheduled operations. A number of these belong to defence establishments while some others belong to State governments or private entities. Many of these airports or airstrips are not operational.  

Boosting regional air connectivity is a highlight of the policy – a job that may prove challenging given the present domestic passenger traffic trends at our airports. 

In June 2016, AAI released the air traffic data for April 2016 relating to 82 airports (international and domestic airports, apart from ones owned by state governments and private parties). It  reveals that :

  • Large Metro airports account for the bulk of the domestic traffic
  • Nearly 65% of the domestic passenger traffic totaling nearly 16 million was handled by just 6 airports – Delhi, Mumbai, Bangalore, Chennai, Kolkata and Hyderabad.
  • 26 airports recorded traffic exceeding 0.1 million domestic passengers. Between them, these airports accounted for over 90% of the total domestic traffic handled.

The Regional Connectivity Scheme, to be implemented from the second quarter of 2016-17, aims to revive the fortunes of un-served or under-served airports and routes. The government has offered several incentives to promote these under served locations.

The FDI policy is expected to boost the civil aviation sector further. It now permits  100% FDI under automatic route in brown field airport projects.

The policy outlines a “demand driven” approach to reviving these, “depending on firm demand from airline operators, as no-frills airports will be done at an indicative cost of Rs 500 million to Rs 1000 million, without insisting on its financial viability. Inputs from and willingness of the State Governments will be taken before revival of any airport is undertaken. AAI/State Govts can explore possibilities of developing these airports through PPP also.”

The Union Budget 2016-17 had also proposed to develop 160 non-functional airports at a cost of Rs 500 to 1000 million each.

It remains to be seen whether these policy measures will inject life into the various dormant airports and airstrips on India’s aviation map.