The Telegraph
Since 1st March, 1999
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Freedom flight for private airlines

New Delhi, Dec. 8: The Naresh Chandra Committee on civil aviation today recommended that private airlines be allowed to operate international services.

Private airlines — Jet and Sahara — have for long been demanding the right to operate overseas flights and had been lobbying both the Chandra committee and the government for the requisite permission.

Top civil aviation ministry sources said in all likelihood the private airlines would be allowed to fly to destinations in south Asia. After a time lag, they will be granted global aviation rights. During this period, the two state-run airlines would be allowed to buy or lease new planes to use up unused bilaterals.

Former Indian ambassador to the US Naresh Chandra told reporters here that route bidding for those bilaterals, which neither of the state-run airlines is able to fly on, can be considered.

The Chandra report also made it clear that while it favoured liberalisation of the bilaterals regime allowing more foreign airlines to fly in to India, “there could be no open skies policy”.

The committee, which presented its report to civil aviation minister Rajiv Pratap Rudy, also repeated earlier recommendations of the draft civil aviation policy prepared by former aviation secretary M. K. Kaw, seeking to increase foreign equity in domestic airlines to 49 per cent, all of which could be picked up by foreign airlines after seeking permission from the Foreign Investment Promotion Board (FIPB).

It also repeated recommendations that a non-lapsable Essential Air Services Fund be set up out of an aviation cess which would replace various taxes on air travel and proceeds from privatising airports.

The funds from this would be used to subsidise air travel on uneconomic but essential routes such as the northeast, Kashmir and the Andamans, instead of forcing airlines to fly a portion of their total number of flights on these routes. The fund would also be used to upgrade airports and build new airports in the state sector.

It also revived the plan to set up an Aviation Economic Regulatory Authority which would check abuse of monopoly powers in the aviation sector, especially in the airport sector.

But even before the government puts its stamp of approval on the report which is expected to be done by January, the move to allow foreign airlines to invest has already started drawing flak.

U. K. Bose of Air Sahara said, “A 49 per cent stake to a foreign airline would mean it would start controlling the domestic airline and this we believe would go against national interest as airlines are the second line of air defence in times of war.”

BJP hardliners had earlier opposed this move, forcing former civil aviation ministers Ananth Kumar and Sharad Yadav to rule against foreign airlines being allowed to pick up stake in domestic airlines. They and the Left parties can be expected to attack the bid to attract foreign airlines to Indian skies.

Chandra also revived plans to sell off state-run national carriers Air-India and Indian Airlines which had been taken off the privatisation list earlier this year.

He said the two airlines should first be restructured “by increasing their capital base with whatever fund infusions the government had earlier planned to bring in as also by helping wipe out accumulated liabilities”. The government had earlier decided to inject Rs 350 crore in IA's capital base.

“We feel government control is shackling growth in these airlines, but even as the move towards privatisation progresses, we do not want the government to stop essential functions like fleet acquisitions,” Chandra said, insisting that the two exercises should go on in a “parallel manner”.

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