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    Hello and welcome to the webchat with Shyamal Majumdar, Business Standard on whether the the draft aviation policy help the Indian middle-class


    Hello, everyone

  • A


    Sir, the draft civil aviation policy has proposed many measures for improving domestic air connectivity and might put the hinterland on the aviation map. But It has shown nothing to reduce the cost of doing business (CDB) for airlines in India by staying mum on rationalisation of taxes on ATF. Why is it so ?


    The policy says ATF drawn by scheduled commercial airlines from the regional connectivity scheme airports will be exempt from excise duty. The purpose is to make sure that the hinterland is put on the aviation map. The main challenge is how to avoid a situation where airports are set up in relatively remote areas but they don't turn out to be ghost airports, as has been the case with several regional airports. Currently, around 75 of the 476 airstrips/airports have scheduled operations. the government of course argues that everything can't be decided on commercial basis alone as the government's job also is to make sure that the infrastructure is ready so that the coming demand can be encashed.

  • R


    What is your take on the regional connectivity scheme and how do you see the government’s decision of setting up a viability gap fund shaping up?


    As I said, it's a good step. There are some problems, though. For example, as rating agency Crisil has said capping of fares on regional routes can be a negative for airlines as even with the 2% cess on other tickets, it is expected that domestic air fares will decline by 5-7% in FY 17. The scheme needs more explanation as there is no clarity on whether a fare of Rs 2,500 per hour would be capped even for last-minute booking, identification of specific routes and associated regional impacts, and specific modalities to be adopted in administering the scheme. The viability gap funding is an excellent move, but then again it has to be executed well. The problem with such funding is that the contract is usually given to those who ask for the lowest funding. What is to be looked at carefully is whether such companies have the required track record to pull it through.

  • I


    The draft policy mandates that on certain routes, fares must not exceed Rs 2,500. Is this not undue state interference in what should be a market-determined process? Once the government starts dictating pricing levels (assuming there is not carterlisation otherwise), what is to stop it from interfering in other processes as well in what is arguably a fully-privatised sector (bar Air India)?


    This doubt has been raised by many quarters and is a valid argument. As they say, the government should create an enabling atmosphere and leave the rest to market forces. But the counterpoint to that would be that the airlines are getting a host of incentives as well and the cap of Rs 2,500 per passenger, indexed to inflation for a one-hour flight is expected to lead to a big spike in passengers. One should look at the objective and it's a laudable one. After all, the government does have a role to play in meeting the aspirations of the country's growing middle class and improving air connectivity. So one should look at this decision in that spirit

  • J


    Is it safe to assume that the draft policy shows some seriousness on the part of the government to address some serious structural issues plaguing the aviation industry and that in turn will help the passengers who use these services?


    You are right. Some of the issues have been pending for long and the policy does address many of them. There are a host of steps such as a well thought out regional connectivity scheme, viability gap funding, duty incentives, setting up of airports on PPP basis, most of which would benefit the industry as well as passengers. The overall objective of the policy is to increase the sale of domestic tickets to 300 million from 70 million at present. Even if part of that is achieved, it will be great. There are some disappointments, though -- for example, the ambivalance on the 5/20 rule is a big negative for many airlines.

  • P


    There has been a lot of talk of making India an MRO hub in this part of the world for at least 7-8 years now, but nothing has come of it (Nagpur was one of the contenders for this). Do you see that happening in the near future at all, or is it just another pot of gold at the end of the rainbow? Can the Fadnavis govt make it happen, at least in Nagpur?


    As you know, if there is a will, there is a way. Sadly, the policymakers didn't see the need for doing anything and let the opportunity go by for far too long. As you know, the MRO business of Indian carriers alone is around Rs 5,000 crore, 90% of which is spent outside India. The draft aviation policy at least gives us a ray of hope by announcing several incentives, the most significant being giving it an infrastructure status. One can only hope the Maharashtra govt and iothers would take advantage of it.

  • U


    The 5/20 rule that has been in place was clearly aimed at protecting Jet. Why has it taken so long to junk what is patently an arbitrary, and therefore unfair, trade practice? Do you think this government is committed to doing away with it, or will Naresh Goyal once again be able to lobby against it?


    I don't want to go into any specific names. But yes, the policy ambivalence on 5/20 is a big disappointment as no other country has this kind of absurd rule. One though the new government which is in power for more than one and a half years should have been more decisive in this respect. It is patently discriminatory for the relatively new airlines.

  • A


    From time to time airlines offer a large number of tickets at discounted fares for a three-day period. However, most of the top tourist destinations such as Goa, Kerala and Rajasthan are excluded. What is your view on this?


    Discounted fares are supposed to create demand so that more and more passengers get attracted. The places you have mentioned are already high up on a tourist's map and hence the demand is already there. Having said that, some of the destinations you have mentioned enjoy huge discounts in off-peak periods. So customers should have no reason to complain

  • V


    With regards to access to new airports the current policies are focussed more towards completing the airport rather than first completing access like direct monorail or flyovers that connect to central locations that would benefit passengers in terms of lower costs. Are such concepts still to stake shape in India?


    You are absolutely right. This has been a big problem in India where last-mile linkage, which is so very crucial, is often ignored. There are many airports in India where access is below-par as these are considered relatively less important. Thankfully, many airport developers are waking up to this problem. And the T2 airport in Mumbai is a shining example of that. Before the inauguration, access to the airport was given equal importance. I think most developers have started realising the virtues of creating an infrastructure outside the airports is equally important.

  • P


    Especially with regards to no-frills airlines where costs of airfare is lower than compared to full-fledged fares sometimes the cost of extra-luggage charged is much higher. Is the benefit of low fare getting nullified incase the passenger has to carry excess luggage in terms of emergencies?


    If customers are availing of additional facilities, they should pay for it -- isn't it? Expecting airlines to pay for excess luggage carried by passengers can be a good clap-trap slogan, but it doesn't make much economic sense. No-frills airlines are also here to do business. As long as the charges are not extortionist in nature, there isn't any problem.

  • N


    Do you think that the airlines will pass on the service tax waiver for maintenance, repair and overhaul (MRO) companies to consumers? How much impact will it have on airfares?


    I don't have any exact estimate of how much impact will it have on airlines, but all airlines will be bound to pass on a major part of the incentives to consumers. The incentives are quite large, after all. For example, the policy has called for abolition of 12.36% service tax, exemption from customs duty on parts, three-years of tax-free storage period of imported spare parts and easy Customs clearance for the MRO segment. Plus the infrastrcture status. Consumers are bound to benefit.

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