Govt takes a step back on scrapping '5/20 rule'

Uncertainty looms over rules governing airlines flying abroad, even as the government is unlikely to scrap these in the draft civil aviation policy.

A committee of secretaries chaired by Cabinet Secretary P K Sinha held its first meeting on Wednesday to give final shape to the much-awaited policy. Secretaries from the finance, home and external affairs ministries attended the meeting to discuss issues mainly related to the fiscal aspects of the policy.

The government had refused to take a stand on whether to abolish the existing rule on airlines flying abroad, government sources said. This would delay plans of new airlines Vistara and AirAsia India to fly on international routes.

Indian airlines need at least five years of local flying and 20 aircraft in their fleets to fly on international routes. The National Democratic Alliance had initially proposed replacing this rule with a credit-based system. The government now has had a rethink.

Older airlines have opposed the scrapping of the rule, saying it will favour new airlines. IndiGo, SpiceJet, Air India and Jet Airways fly on international routes.

The draft civil aviation policy, still in the consultation stage, will not state the government's stand on the 5/20 rule. "This item is still open-ended. It will be decided at the final policy stage," government sources said.

The government is likely to state all the four options available on airlines flying abroad. These will be put up for discussion and a decision will be taken by the civil aviation ministry and sent to the Cabinet for approval.

The options available with the government are keeping the present rule, scrapping it, moving to a credit-based system linked to route dispersal guidelines, and allowing airlines to fly abroad immediately on assurances of attaining the required credits.

"A decision will be firmed up in the final Cabinet note," a government official said.

The government had initially proposed airlines acquire minimum domestic flying credits based on routes and distances for international flying rights.

According to the proposal, airlines need 300 credits to fly to destinations more than six hours away and 600 credits to destinations closer home. Airlines that start flying abroad will have to maintain a minimum 200 credits every year.

According to industry sources, each aircraft earns 30-35 credits a year in the country by following the route dispersal guidelines.

So, an airline with 10 aircraft will take a year to attain these credits.

Officials said the government had received two sets of views on the 5/20 rule. "One view finds it unnecessarily restrictive as no foreign carrier has to abide by it. The other view is when new carriers came in they knew about the restriction, so let them go through the grind," said the official.

The official added both Vistara and AirAsia India had said the rule favoured foreign airlines.

"The removal of these rules will favour foreign airlines-controlled new entrants who have shown, at best, a peripheral interest in serving the Indian market," Rahul Bhatia, chairman, Federation of Indian Airlines, had said in a letter dated August 25.

The older airlines had sought an appointment with Prime Minister Narendra Modi on this matter.

Sources said Modi had directed the airlines to put their views to Civil Aviation Minister Ashok Gajapathi Raju.

The government has delayed a decision although both Raju and Minister of State for Civil Aviation Mahesh Sharma have said they personally feel the rule should be scrapped.

FOUR OPTIONS FOR AIRLINES

• Govt has option of keeping the present rule
• Scrapping it
• Moving to a credit-based system linked to route dispersal guidelines
• Allowing airlines to fly abroad immediately on assurances of attaining the required credits