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New Delhi, March 10: The civil aviation ministry may have another policy battle on its hands soon. Sections of the government want the ministry to change the rule that makes it mandatory for a domestic airline to have at least 5 years of experience before flying abroad.
Several ministries, including finance and corporate affairs, and the Planning Commission feel the policy has no logic as India allows the entry of foreign start-up airlines.
Among the start-ups allowed to fly into the country are Air Arabia, Tiger Airways and AirAsia.
India also does not insist on the foreign newbies the other norm that is a must for domestic carriers flying abroad — a fleet strength of 20.
Last year, the ministry of corporate affairs commissioned a study — Competitive Framework of Civil Aviation Sector in India — which recommended the removal of this discrimination.
This report said: “Such fleet, equity and experience requirements deter entry and, thereby, reduce consumer choice of international passenger air carriers. Further, the Open Sky Policy allows foreign airlines into India as long as they abide by safety regulations and are licensed by their home country, which may not require a minimum 20 aircraft fleet size and five years operational experience.
“In effect, this policy creates a two-tier competitive environment for international carriers — foreign and Indian — putting Indian domestic carriers that want to provide international services at a disadvantage,” it said.
Instead, the report went on to suggest that the “regulator may consider removing fleet, equity and experience requirements for international carrier service providers. Specifically, equity requirements should be replaced by requirements for carrier service providers to demonstrate financial viability.”
In response, the civil aviation ministry set up its own committee headed by its secretary to study the report and decided on status-quo as the government was in the process of formulating a civil aviation policy. “The committee observed that the ministry is formulating the civil aviation policy. The committee, therefore, recommended that the matter would be reviewed at an appropriate time while framing the aviation policy.”
A policy has been in the works for a long time ever since the UPA government came into power. However, it never managed to see the light of the day because the civil aviation ministry tried to put in place restrictive clauses on foreign investment and experience, which were opposed by other ministries.
The opposing ministries believe the civil aviation ministry is in the grip of airline lobbies. These entities want a restricted market and have no impetus for fresh competition as new entrants can reduce fares, causing fresh losses to their already strained finances.
Tata venture
The battle for policy change assumes significance against the backdrop of the Foreign Investment Promotion Board’s permission to AirAsia-Tata to start an airline.
The civil aviation ministry tried to stall the entry of the new player, arguing that FDI in aviation policy was relevant for existing airlines and that foreign investors had the right to buy into existing carriers but not to join hands with Indian investors to start new airlines.
The commerce and finance ministries held opposing views: they said their interpretation of the FDI press note as well as the original intent of the government was that foreign investment in airlines was welcome, both for new as well as for existing airlines. The FIPB approved the venture only after a protracted wrangling among the ministries.
Changing norms for flying abroad could mean that new start-ups such as the Tata venture would be allowed to fly abroad, if they had sufficient fleet and financial muscle.
Meanwhile, Malaysia-based AirAsia has got approval from the ministry of corporate affairs for the name of its Indian venture with the Tatas, which will be called AirAsia (India) Private Ltd.
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