In a move to connect the unconnected, the Government cleared a major reform in the aviation sector, scrapping the 5/20 overseas flying norm for domestic carriers in its new civil aviation policy. It also capped fares at Rs2,500 for one-hour flights and Rs1,200 for 30 minute flights and imposed a small levy on passengers to fund the regional connectivity in the country.
The long-awaited new civil aviation policy that also seeks to increase regional air connectivity and encourage more people to fly was cleared by the Cabinet on Wednesday.
As part of the policy, the Aviation Ministry will come out with initiatives to develop new airports, separate regulations for helicopters and measures to boost skill development in the aviation sector.
Commenting on the development, Prime Minister Narendra Modi tweeted that the Civil Aviation Policy cleared by the Cabinet would transform the sector and greatly benefit passengers.
Civil Aviation Minister Ashok Gajapathi Raju said, “The new policy is aimed at ease of doing business for airline operators, and affordable, convenient and cheaper travel for flyers at large, especially in rural areas.”
As India had seen 139.32 million domestic and over 50 million international air travellers in 2014-15, the Government plans to increase the number of travellers, both domestically and globally. “Through this new aviation policy, we aim to create an eco-system to handle over 300 million domestic passengers in the next five years, 500 million by 2027, and 200 million international travellers by 2027,” a top Aviation Ministry official said.
Airlines will also get tax incentives for operating on unserved routes under the regional connectivity scheme. The new policy aims at charging less than 2-per cent levy on all air tickets to fund the Regional Connectivity Scheme and provide viability gap funding for airlines to encourage operations on regional routes.
The 5/20 rule that allows a carrier to fly abroad only if it has 20 aircraft and has flown domestic for five years, has been scrapped and now any domestic airline can fly overseas provided they deploy 20 planes or 20 per cent of their total capacity for domestic operations.
Explaining the 20 per cent eligibility mathematics, Minister of State (Independent Charge) for Culture & Tourism and Civil Aviation Mahesh Sharma said, “For instance, if a flight having a 120-seat capacity operates domestically six times a day, then the operator’s eligibility calculation will be considered at par if 20 per cent of the total number of seats (ie; 120 X 6 X 365) fulfil the eligibility parameters.”
The Ministry said the 5/20 norm is being replaced by a formulation which provides a level playing field and allows airlines, both new and old, to commence international operations provided they continue to meet some obligations for domestic operation.
The new policy measures are also expected to benefit about 220 million air travellers in the next five years.
In efforts to increase air traffic into the country and ensure improved ease of doing business, the regime of bilateral rights and code share agreements would be liberalised. “Open skies will be implemented on a reciprocal basis for SAARC countries and countries beyond 5,000 km from Delhi,” the Ministry said in a release.
A committee headed by the Cabinet Secretary would decide on allotment of additional capacity entitlements for overseas carriers wherever designated Indian airlines have not utilised 80 per cent of their bilateral rights but the foreign counterparts have utilised their quota and are looking for more.
Also, seeking to provide a boost for the Maintenance, Repair and Overhaul (MRO) segment, the Ministry would persuade State Governments not to levy VAT on such activities. “Airport royalty and additional charges will not be levied on MRO service providers for a period of five years from the date of approval of the policy,” the release said.
As part of efforts to ensure overall development of the domestic aviation sector, Airports Authority of India (AAI) would continue to develop and modernise its airports. “AAI will be suitably compensated in case a new greenfield airport is approved in future within a 150 km radius of an existing AAI airport which is not yet saturated,” the release said, adding that development of airports by way of Public Private Partnerships would also be encouraged.