Why after so many years a National Civil Aviation Policy for INDIA ?

  • India has the potential to be among top three nations in terms of domestic and international passenger traffic globally.
  • India has a strong base of middle class population of about 30 crore willing to opt air travel rather than conventional mode of transport.
  • India is a country where people want to take air travel but are pulled back because of the highly fluctuating ticket prices due to instability in ATF prices.
  • India is a country where a good number of airlines operate connecting different locations of the world.
  • India is a highly lucrative market for the operations of LCC & ULCC.

Despite these advantages, the Indian aviation sector was not able to achieve the position it should have and in the year 2016 was ranked 10th in the world in terms of number of passengers.

Mission and Vision of NCAP

Mission: Provide safe, secure, affordable and sustainable air travel for passengers and air transportation of cargo with access to various parts of India and the world.

Vision: To create an eco-system to make flying affordable for the masses and to enable 30 crore domestic ticketing by 2022 and 50 crores by 2027, and international ticketing to increase to 20 crores by 2027. Similarly, cargo volumes should increase to 10 million tonnes by 2027. (Before pandemic)

NCAP formulated in 2016 covers the following aspects:

Area Needing Utmost Attention:

1. Philosophy behind Regional Connectivity Scheme (RCS) – UDAN (ude desh ka aam naagrik)

The Government proposed to take flying to the masses by making it affordable and convenient. For example, if every Indian in middle class income bracket took just one flight in a year, it would result in a sale of 35 crore tickets, a big jump from 7 crore domestic tickets sold in 2014-15. This would be possible if the air-fares, especially on the regional routes, were brought down to an affordable level with regard to the population of that place. The policy states that the reduction in costs would require concessions by the Central and State Governments and Airport Operators.

Regional Connectivity Scheme

Ministry of Civil Aviation (MoCA) targeted an indicative airfare of Rs 2500 per passenger approximately, indexed to inflation, for a significant part of the capacity of the aircraft for a distance of 500kms to 600 kms on RCS routes (equivalent to about one hour of flight). The cap for helicopters under RCS would be higher.

In India there are many unserved and underserved airstrips which as per the policy can potentially be revived to make cheaper air travel a reality.

As in the year 2016 around 75 out of 450 airstrips/airports had scheduled operations. Revival of the remaining air strips and airports was planned to be “demand driven”, depending on firm demand from airline operators. The policy says that Airports Authority of India (AAI) / State Govts can also explore possibilities of developing these airports through PPP (Public Private Partnership) also.

1.1 As per the policy Govt aid for the project is to be provided as mentioned below:

  • RCS would be made operational only in those States which reduce VAT on Aviation Turbine Fuel (ATF) at these airports to 1% or less for a period of 10 years.
  • State Government would provide land free of cost and free from all encumbrances and also provide multi-modal hinterland connectivity (road, rail, metro, waterways, etc.) as required.

NCAP states that for upto10 years from the date of commencement of flight operations under RCS:

  1. There would be no airport charges levied for operations under RCS. Landing, parking and Terminal Navigation Landing charges (TNLC) would be waived and Route Navigation and Facilitation charges (RNFC) would be levied on a nominal basis.
  2. Service tax on tickets would be levied on 10% of the taxable value (abatement of 90%) of tickets for passengers embarking from or terminating in an RCS airport, without any input credits for an initial period of 1 year from the date of commencement of operations of the RCS airport as notified by MoCA.
  3. State government would provide police and fire services free of cost. Power, water and other utilities would be provided at substantially concessional rates.
  4. Self-ground handling by airlines would be allowed for operations under RCS at all airports.
  5. Excise duty at a rate of 2% would be levied on Aviation Fuel drawn by operators from the RCS airports for an initial period of three years from the date of notification.
  6. VGF indexed to ATF prices and inflation would be provided for a particular route, on a competitive bidding basis, if necessary, for a period up to 10 years from commencement of operation by an airline.
  7. VGF (Viability Gap Funding) would be shared between MoCA and the State Government in the ratio of 80:20. For the North Eastern States, the ratio would be 90:10. The payment of the full amount of VGF would be made to the airline operator from the Regional Connectivity Fund (RCF) and the State Governments would be subsequently asked reimbursement.
  8. Cost-effective security solutions by Bureau of Civil Aviation Security (BCAS) and State Governments.
  9. Similarly, up to 10 years from the date of commencement of cargo operations at the RCS airports, the air freighters would be entitled to the following: –
  • There would be no airport charges levied for operations under RCS.
  • TNLC (Terminal Navigation and Landing Charges) would be waived and RNFC would be levied on a nominal basis. –
  • Excise Duty on ATF drawn by cargo operators from the RCS airports would be at the rate of 2% for a period of 3 years from the date of notification. However, Cargo operators would not be entitled to VGF.

2. Safety

Safety violations would be treated with zero-tolerance. As per the policy DGCA would be given administrative and financial autonomy for an effective aviation safety oversight system.

Further, DGCA would strive to create a single-window system for all aviation related transactions, queries and complaints. The services rendered by DGCA would be fully automated by implementing eGCA project on priority in a phased manner starting from May, 2016 onwards with a target date of completion by December, 2016.

DGCA would implement State Safety Program (SSP) and develop State Safety Plan periodically which would address the aggregate safety risks at the National level. Under the SSP, it would be ensure that relevant service providers implement the Safety Management Systems (SMS), proactively identify operational hazards and apply risk management principle for the mitigation of these hazards. A State Safety database would have to be developed to act as a basis for identification of safety risks.

DGCA would carry out a review of all Civil Aviation Requirements (CARs) as and when required on need basis and at least once every 5 years starting from FY 2016-17.Such a review also could be done by engaging an outside agency or by engaging experts on contract basis for a limited period.

3. Route Dispersal Guidelines (RDG)

RDG was introduced in 1994 to provide air connectivity to Jammu and Kashmir, North East Region, Andaman& Nicobar Islands, Lakshadweep, Tier-2 and Tier-3 cities, by way of internal cross-subsidy by airlines using their revenues on the Trunk Routes (total 12 in number). RDG succeeded in creating connectivity to remote locations. At present, the capacity actually deployed on Category II and III routes is in excess of the RDG threshold, highlighting the business potential in these regions.

4. {5/20} Requirement for International Operations

In October 2004, the Union Cabinet stipulated that for Indian carriers to fly abroad, would have to fulfill the requirement of flying on domestic routes for 5 years and possession of a fleet of 20 aircraft. Keeping in view the developments since its implementation, various options were considered. It was felt that this stipulation, which was unique to India, should be replaced by a scheme which would provide a completely level playing field and allows airlines, both new and old, to commence international operations provided they continued to meet some obligation for domestic operation.

The requirement for 5/20 was modified and all airlines as the the policy can now commence international operations provided that they deploy 20 aircraft or 20% of total capacity (in term of average number of seats on all departures put together), whichever is higher for domestic operations.

5. Bilateral Traffic Rights

The government planned to liberalize the regime of bilateral rights leading to greater ease of doing business and wider choice to passengers.

The government entered into an ‘Open sky’ Air Service Agreement (ASA) on a reciprocal basis with SAARC (South Asian Association of Regional Cooperation) countries and countries with territory located entirely beyond a 5000 km radius from New Delhi. Unlimited flights above the existing bilateral rights would be allowed directly to and from major international airports within the country as notified by MoCA from time to time. However, the points of call at other airports under the existing ASA will would continue to be honored till the same would be renegotiated. For countries partly or fully within 5000 km radius, where the designated carriers of India had not fully utilized 80% of their capacity entitlements, but foreign carriers /countries had utilized their bilateral rights and were pressing for increase in capacity, a method would be recommended by a committee headed by the Cabinet Secretary for the allotment of the additional capacity entitlements.

6. Code Share Agreements (CSA)

A Code-Share Agreement between two airlines allows one airline (‘Marketing airline’) to sell seats on a flight operated by another airline (‘Administrating airline’), with the airline code and flight number of the marketing airlines. This helps in seamless connectivity for passenger. In this regard, the Policy stated that:

a) Domestic Code-share Points in India would be liberalized within the framework of the ASA.

b) Indian carriers would be free to enter into domestic code-share agreements with foreign carriers to any point in India available under the respective ASA.

7. Airports developed by State Governments, Private sector or in PPP mode

As per the policy MoCA would continue to encourage development of airports by the State Governments or the private sector or in PPP mode. MoCA would also encourage the State Governments to develop new airports in their State by forming SPV (Special Purpose Ventures) with Airport Authority of India or with other interested Public Sector Undertakings/ Industry in order to create stake and ownership. Wherever so required, MoCA would endeavor to provide regulatory certainty in all required conditions.

8. Airports Authority of India (AAI)

In the year of NCAP formulation out of 125 airports of AAI, about 95 were operational of which 71 had scheduled commercial operations as of 1st Jan 2016 and as per the policy AAI would take up development of airports in the following ways:

  • AAI would be suitably compensated by Government of India and/or the State Government or the private sector airport operator in case a new greenfield airport was approved in future within a 150 km radius of an existing operational AAI airport (not applicable to civil enclaves). However, such a compensation would be considered only if the current capacity of the existing AAI airport was not reaching the saturation point in the year of commissioning of the new project. As an alternative to compensation, AAI would be given an option at the discretion of the airport developer to either have the right of first refusal, or equity participation between 26% to 49% in the new airport or AAI would be allowed to form JV with the participating state government. Once the options were given to AAI and if AAI chose to not avail any of the options, then no compensation would be due. As far as existing airport governed by OMDA/concession agreement were concerned, the present provisions of the same would prevail and the above compensation clause would not apply.
  • AAI would continue to modernize the existing airports and upgrade quality of services. AAI would maintain an ASQ rating of 4.5 or more across all airports which had a throughput above 1.5 mppa and ASQ rating of 4.0 or more for the rest.
  • AAI would also explore the possibility of giving out O&M (Operations and Maintanance) contracts for a cluster of existing and/or new airports.
  • AAI airports with throughput above 0.5 mppa would strive to generate non-aeronautical revenue in excess of 35% of the airport’s total revenue.

9. Helicopters

Helicopters play a key role in remote area connectivity, intra-city movement, tourism, law enforcement, disaster relief, search and rescue, emergency medical evacuation, etc. India in 2016 had less than 300 civilian helicopters which was very low as compared to other developing nations.

Thus as per the policy MoCA would coordinate with MoF (Ministry of Finance), MHA (Ministry of Home Affairs), NHAI (National Highway Authority of India), Indian Railways, insurance companies, hospitals, Pawan Hans Limited and other helicopter operators to facilitate Helicopter Emergency Medical Services (HEMS).

During the initial phases helicopters would be free to fly from point to point without prior ATC clearance in airspace below 5000 feet and areas other than controlled airspace, prohibited and restricted ones, Temporary Segregated Areas (TSAs) and Temporary Restricted Areas (TRAs) after obtaining the Air Defense clearance, wherever required and intimating the following information to the nearest ATC: Point of Origin, Destination, Level, Expected Time of departure (ETD), Expected Time of Arrival (ETA) and the duration of flight.

10. Aeronautical ‘Make in India’

MoCA would be nodal agency for developing commercial aero-related manufacturing and its eco-system in India.

In case the cost of made-in-India aircraft and components work out to be higher than those supplied from their original sources, the government would consider an incentive package to nullify the cost differential.

11. Air cargo

Promotion of both domestic and international Air cargo and express delivery services is a key objective of the government, given its importance from a ‘Make in India’, e-Commerce and exports perspective. Revenue from air cargo helps airlines subsidize the cost of passenger of 36 tickets and take flying to the masses. Air cargo, particularly domestic has a high employment potential, especially for semi-skilled workers.

Thus as per the policy the Air Cargo Logistics Promotion Board (ACLPB) had been constituted to promote growth in air cargo by way of cost reduction, efficiency improvement and better inter-ministerial coordination. The Board and the industry would submit a detailed action plan after stakeholder consultation, with the objective to reduce dwell time of air cargo from ‘aircraft to truck’ to below 48 hours by 31 December 2016 and to 24 hours by 31 December 2017 by reduction in free time and other measures. For exports, Dwell Time was to be reduced to 12 hours by 31st December, 2016 and 8 hours by 31st December, 2017.

The action plan proposed by ACLPB would be forwarded to Central Customs Coordination Committee (CCFC) to achieve the stated objectives. The government would streamline and simplify Customs procedures and ensure a shift to paper-less air-cargo processing through use of digital signatures for transmission of messages.

Airport operators would be encouraged to provide space for at least a10- year lease to operators of express cargo freighters who would then develop dedicated infrastructure to improve their operational efficiency. MoCA would encourage development of cargo-villages near airports.

The government would endeavor that all relevant central government authorities were available through a single window at the cargo terminals.

ACLPB would promote global good practices like Free-Trade Warehousing Zones (FTWZ), Air Freight Stations, Bonded trucking, dedicated cargo airports etc.

Since freighter aircraft suffered from low priority accorded in terms of time slots and parking bays. ACLPB would recommend norms to address the issue.

12. Ground handling

As per the NCAP the existing Ground Handling Policy/Instructions/Regulations would be replaced by a new framework given below:

  • The airport operator would ensure that there are three Ground Handling Agencies (GHA) including Air India’s subsidiary/JV at all major airports as defined in AERA Act 2008 to ensure fair competition.
  • Non-major airports were exempted from minimum number of ground handlers. Airport operator would decide on the numbers, based on the traffic output, airside and terminal building capacity.

13. Sustainable Aviation Resources

  • MoCA would strive to develop a sustainable Indian aviation industry by working with DGCA, Ministry of Environment, Forest and Climate Change and industry stakeholders.
  • MoCA would encourage roll out of Airport Collaborative Decision Making (CDM) to reduce on-ground and aerial congestion.
  • All equipment operating within the airport environment would have to be in compliance with latest emission norms by 1 April 2017.
  • Airports would be encouraged to use Fixed Ground Electrical Power (FGEP) and Pre-Conditioned Air (PCA) units. Airlines would be encouraged to use single engine taxiing and dispatch-towing.
  • All airports would have to undertake energy audit and adopt an energy conservation plan. All greenfield airports would have to have a concrete plan of energy efficiency and conservation. Airports would also have to have their own waste management facilities for solid and liquid waste.

Conclusion

Keeping in mind the changing dynamics of the Indian aviation industry, introduction of new technology Eg: drones, the changing scenario of privatization of airports and disinvestment of the national carrier and finally the undeniable Covid induced financial crisis what in your opinion have been the best aspects of the NCAP that have helped strengthen the aviation market in the country and have helped create a level playing ground for all players and also what could be the possible amendments in the NCAP that could further improve the Indian Aviation Market?

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