High growth, maiden policy propel aviation sector

A maiden integrated policy and over 20% month-on-month traffic growth gave wings to the country`s civil aviation sector in 2016.

The sector reaped benefits out of a rise in domestic disposable income, lower jet fuel prices and enhanced services to the non-metro cities, which accelerated India`s passenger traffic growth in 2016.

According to the latest data from the Directorate General of Civil Aviation (DGCA), passenger traffic during January-November 2016 zoomed by 23.10% to 90.36 million.

This rise and other contributing factors have led global airlines` industry body International Air Transport Association (IATA) to estimate that India will displace the UK as the third-largest aviation marketplace by 2026. It is currently at 9th.

Recently, Minister of State for Civil Aviation Jayant Sinha elaborated that the sector has "dramatic headroom" for growth as India has only 150 million passenger trips a year as compared to China`s 450 million and the US` 800 million.

In the backdrop of such high growth, the sector finally got its maiden integrated National Civil Aviation Policy (NCAP).

The long-awaited policy envisages a roadmap to support 300 million air travellers in five years and steps to make flying affordable and convenient.

Broadly, the policy dwells on upgrade of airports, regional connectivity, easing of norms for flying abroad, liberalisation of the open skies regime, development of cargo hubs, chopper services, attracting investments in maintenance and ground-handling and security.

The ambitious policy did away with one of the most contentious rules of the sector known as `5/20` -- five-years operation and a 20-aircraft fleet -- to qualify for flying abroad.

The five-year wait was done away with, but airlines will need 20 aircraft or fly 20% of their capacity on domestic routes.

The policy may be far away from achieving its intended target, but its showpiece sub-segment -- the `UDAN` (Ude Desh ka Aam Naagrik) Regional Connectivity Scheme (RCS) -- is expected to become a reality from early 2017.

According to Civil Aviation Minister P. Ashok Gajapathi Raju, the first flight under the RCS is expected to be operated by January 2017.

The Udan scheme, meant to enhance air passenger traffic in the country by stimulating demand on regional routes, will be in operation for a period of 10 years, provide air connectivity to unserved and remote routes with airfare being capped at Rs 2,500 for an hour`s journey of around 500 km.

The RCS is expected to support airlines by providing direct financial support namely VGF (viability gap funding), which would be given to the interested airlines to kick off operations to an un-served or underserved airport, and also keep passenger fares affordable.

The central government is expected to provide concessions in the form of reduced excise duty and service tax, whereas state governments will have to lower the VAT (value added tax) on ATF (air turbine fuel) to one % or less.

Besides, the state governments would not charge on security and fire services while electricity, water and other utilities would be provided at concessional rates.

Minister of State Sinha elaborated that through Udan, the central government is also working to expand the aviation map of India from 75 to 150 airports, adding that the Kanpur and Bhatinda airports have become operational under the scheme.

Among other highlights of 2016 -- the government has initiated a trial run for "non-stamping" of passengers` baggage tags at the time of boarding the aircraft at six airports to facilitate hassle-free movement of passengers with hand baggage.

In other major developments, the government appointed B.S. Bhullar as chief of the country`s civil aviation regulator, DGCA.