Is the government planning to take some steps to facilitate a revival in the sector that has been hit hard by the lockdown?
The aviation sector was on a steady path before pre-covid. The pandemic did put a break on our growth. But our skies remained abuzz with cargo operations during lockdown. We allowed passenger aircraft to lift not just essential medical equipment but other essential commodities as well. We have taken many major steps to revive the sector. Domestic air services have been restarted in a calibrated manner. Air bubbles have been established with 22 countries (Afghanistan, Bahrain, Bangladesh, Bhutan, Canada, Ethiopia, France, Germany, Iraq, Japan, Kenya, Maldives, Netherlands, Nigeria, Oman, Qatar, Rwanda, Tanzania, UAE, UK, Ukraine and the US). These are temporary arrangements aimed at restarting international passenger services while regular international flights remain suspended due to COVID-19. We have promoted private investments in airports. Adequate care was taken to ensure cargo terminals were operational at major airports. The GST rate was cut to 5% for domestic maintenance, repair and overhaul (MRO) services. We have been encouraging Indian carriers to increase their share in international air cargo traffic. Lastly, we undertook route rationalisation in coordination with the Indian Air Force to reduce fuel consumption.
When will the government allow airlines to operate at 100% capacity from 70% now? And when will market-determined fares come back?
We had decided to start domestic scheduled operations in a calibrated manner with fare capping in view of the COVID-19 pandemic in the interest of passengers for performing journey for essential purposes as well as interest of airlines. The capacity of scheduled domestic operations has further been increased from time to time based on the COVID situation and traffic demand. The capacity has been increased from 60% to 70% recently, keeping in view the festive season. The COVID situation and passenger data is being closely monitored and a decision to allow 100% capacity would depend on the situation which may arise in near future. We have already crossed 50% of pre-Covid levels as far as the number of daily passengers is concerned. It is expected that we will reach pre-Covid level by the year end.
When do you see the sector recovering?
As far as domestic civil aviation is concerned, the recovery since we opened on May 25 has been steady and predictable. We started with 30,000 passengers and a limit of 33% (May 25). Today we are at 70% and we have registered 2,25,000 passengers per day. Unless there are unforeseen developments, and the behaviour of the virus stays on predictable lines, domestic aviation could be at pre-Covid level by the end of the year or by early first quarter of next calendar year. There are cynics among us who say these are additional traffic on account of factor X or factor Y and that when that is over the traffic will drop. But that is not happening because the rise has been steady from 30,000 to 2,25,000. A further rise will take place as there is a level of confidence in air travel as a relatively safe mode of travel.
What about resumption of international flights?
That depends on three factors: Domestic civil aviation crossing the 50% mark, which we have achieved; the behaviour of the virus – some cities in Europe are going through a very pronounced second wave. Lastly, vaccine. Once a vaccine is available, people will get the confidence to fly. A lot also depends on easing of entry restrictions in foreign countries. For e.g. Saudi Arabia has got entry restrictions on Indians going back there. So we are flying to Saudi Arabia empty but we are flying people back. They are not allowing foreigners to enter other than their own people, so how can we start normal international operations in such sectors?
Private airlines aren’t very happy with the government’s incentives. Your comments.
We have taken a number of steps for them. GST rate on MRO was cut from 18% to 5% with full input tax credit from April 1, 2020. This will attract MRO business to India leading to a lot of savings for airlines. The proposal to bring the ATF under GST is before the GST council which has representation from the states as well. Our ministry has suitably brought this to the notice of the Ministry of Finance. We undertook route rationalization in the Indian airspace. Till now only 60% of airspace was available for civilian aircraft movement; this will save time and money for the passengers and the airlines.
We are acutely conscious that civil aviation is a critical driver of economic growth. With 7% penetration we get 17% rates of growth so we will do whatever we can and we are. The fact is we have been able to save the sector through these steps. It’s a work in progress.
What about expansion of airports and related infrastructure?
There are more than 100 operational airports. We have an ambitious target to add 100 more in five years. We have identified 100 airports/heliports/water aerodromes for development.
Today we have more than 100 operational airports in the country. We have an ambitious target to add 100 more in the next five years. We have identified 100 airports/heliports/water aerodromes to be developed under the Regional Connectivity Scheme (RCS) — Ude Desh Ka Aam Nagrik (UDAN). These 100 RCS airports comprise 59 RCS airports, 31 heliports and 10 water aerodromes. Further, to usher in a new era of air travel in India, we introduced a new mode of transportation i.e. seaplane operations from water aerodromes under UDAN; 10 water aerodromes received successful bids for connecting routes under UDAN 3.0. The Cabinet Committee on Economic Affairs (CCEA) has approved the proposal of revival of development of unserved and under-served air strips of state government, AAI, civil enclaves & CPSUs at a cost of Rs 4,500 crore with the budgetary support of Government of India. Additionally, AAI has ambitious plans to upgrade the existing airport infrastructure to enhance the capacities.
The government has been working on a plan to promote financing and domestic manufacturing of aircraft. What is the progress of this initiative?
Aircraft operating, financial and hybrid leases have been notified as financial products under the IFSC Act. Indian insurance companies, pension funds and others have been allowed to participate in such businesses. Global financial institutions and technology companies have started operations at IFSC, which will facilitate aircraft financing. Foreign OEMs have shown interest in enhancing aircraft assembly in India. Rupee-denominated aircraft leasing has taken off domestically.
Simultaneously, we are encouraging Indian private sector players to enter global aviation supply chains. Manufacturing is seeing a boost due to the promotion of civil and defence MRO activities. A defence production working group is looking at identifying resources that can be shared for better economies of scale. A unified certification of parts and maintenance processes for specific defence/civil MRO convergence works is being looked at.
In August 2020 the Government approved 78 new routes under UDAN 4.0 to enhance connectivity. What are the next expansion plans for UDAN?
The ministry has created Regional Air Connectivity Fund Trust (RACFT). The viability Gap Funding (VGF) for the UDAN operations is provided from funds available with the trust. The funds are collected by the trust through levy on domestic departures of the scheduled operations. Thus, availability of funds in the RACFT is directly linked to the domestic scheduled air operations. Due to suspension of air operations from March 25 till May 25, 2020, the funds could not be collected by the trust. Since the domestic air operations have re-commenced with 70% of the pre-covid capacity being allowed to operate, the fund flow to RACFT is still low. Considering the reduced availability of funds in RACFT, RCS Cell has allotted only 78 RCS routes in the first phase of UDAN 4.0 mainly in priority areas and from unserved airports which are ready. However, once the scheduled domestic operations improve further and fund position in RACFT improves, the remaining bids received under RCS – UDAN version 4.0 shall be considered and awarded, as per the scheme document.