 "Connectivity is more important than commercial interests: R N Choubey")
On Friday, the Union government released a revised draft of the civil aviation policy, liberating the sector on many fronts. However, a few regulations will continue for airlines. In his first interview after taking charge as Union civil aviation secretary, R N Choubey tells Somesh Jha as the sector grows, the government will slowly do away with the regulations, ushering in a telecom-like revolution. The levy of two per cent cess on air tickets will fetch about Rs 1,500 crore a year, he adds. Edited excerpts:
What do open skies beyond 5,000 km mean for Indian carriers?
We must understand that we have to strike a balance between protecting Indian carriers on the one hand and the need to provide better connectivity to passengers on the other. This is because once we provide better connectivity, there will be a huge increase in tourist traffic. Those currently going somewhere else due to poor connectivity will come to our country. There has to be a balance. It is because of this balance that we have said countries within a 5,000-km radius will be taken up after five years. As you are aware, the biggest competitors of Indian airlines are from within 5,000 km; so, it is calibrated competition.
Let's say an airline wants to fly to Delhi from Frankfurt (Germany) and then go to Colombo (Sri Lanka). Would that be allowed?
We will work out all those details. Whether we will allow what is known as the fifth freedom (an airline from a country having the rights to fly between two other countries) or not hasn't been firmed up. These details will be worked upon once the policy is finalised after receiving all inputs. Also, whether there should be open skies to all the cities in the country or to limited cities are details that will be part of the final policy.
Please explain how the auction route will work for short-haul destinations.
Let's say an airline from France has exhausted all the entitled 10,000 seats but domestic carriers are able to use only 2,000; French airlines will want more. However, domestic carriers will oppose this, saying 'why should we give more (seats to them) and allow them to take away my business when I have not been able to utilise my pot'. In such a scenario, we will tell the foreign carrier we will give, let's say, 2,000 more seats, over and above the entitlement. The additional seats will be bid out for travelling to cities such as Delhi and Mumbai.
Will this be restricted to metro routes?
We need to work that out. I am explaining the methodology alone. We will bid out seats at different India airports, over and above the existing bilateral entitlement, without any reciprocity.
Will this comply with International Civil Aviation Organization norms?
Yes. Countries are free to do so. The only thing is there won't be a bilateral agreement (while bidding), as I am offering the seats unilaterally.
The policy talks about raising the foreign direct investment (FDI) cap from 49 per cent to more than 50 per cent only if the skies are completely opened in 2020. Does that mean an increase in the FDI cap will be considered only after 2020?
We are saying a thought will be given when there are open skies after 2020. But nothing prevents the government from doing it (raising the cap) before that. When you enter into an open-skies arrangement, a distinction between Indian and foreign carriers isn't valid. So, when is no restriction on flying to and from the country, how does it matter whether domestic or Indian carriers substantially owned by foreign players are flying out?
Does that mean complete liberalisation of FDI?
Whether partially or completely, but it could be liberalised.
We are still stuck at altering the '5/20 rule'. Why was there no clarity on this?
Clarity will come once the policy is implemented. These are just suggestions, which aren't applicable today. It is only a draft policy put in the public domain for consultation; it will become a policy only after the approval of the Cabinet.
Can we say we will move in the direction of liberalising the 5/20 norm?
I cannot say that. On that issue, we have a completely open mind and all stakeholders' view will be taken into consideration before we take a final decision.
Why was there a need to retain the route dispersal guidelines (RDGs)?
It is necessary for us to ensure air connectivity to remote parts of the country. We cannot do away with it. That's the main reason. If we remove this requirement, connectivity will be purely determined by commercial considerations. If it is purely commercial, it is possible several destinations in remote regions might fall off the connectivity map.
But wouldn't that be resolved with the regional connectivity scheme?
We don't want to do that. There is no compulsion to fly on regional routes in this scheme.
Airlines complain they cannot withdraw existing operations from non-profitable routes through RDG. What is the need for that?
The need for connectivity to remote areas is greater than the commercial needs that dictate the routines of airlines. That is why we created a system known as the RDG, which provides for internal cross-subsidisation. Airlines make money on profitable routes and some portion of the profit is used to fly to remote regions because the law requires them to do so. We will need such a mechanism, as many remote areas will not be served otherwise.
Did the ministry check whether airlines are breaking-even on remote routes?
As I mentioned, if they were breaking-even or making money, we didn't need RDGs. So, the rationale is in some areas, they might not make money but it is desirable and necessary that they fly there for connectivity.
How many low-cost airports will be developed through this scheme?
Under the regional connectivity scheme, we will revive airports for which there is demand from airlines. Suppose, I revive Purnea in Bihar but I realise no airlines wants to go there. We will not go and do that in advance. We will ask the airlines 'which are the regional airports in the country where you wish to go?' So, I cannot fix a target right now. All I can say is the Airports Authority of India (AAI) has the wherewithal to develop these underused airports as no-frills ones, depending on the demands from airlines.
Would the regional connectivity scheme be applicable only to regional airlines, as mentioned in the policy?
It will also be available to others. But we don't think other carriers will go there at all. You can't take a 250-seater aircraft flying 20 passengers to such remote routes.
Do you think national carriers will take up the scheme?
That is up to them. It depends on an airline's business model. Normally, airlines don't like multi-configuration aircraft. It's difficult to have separate facilities for them. In this case, these airlines might decide to have a subsidiary for regional connectivity.
How much will be collected by levying two per cent cess on air tickets?
Around Rs 1,500 crore every year
Why did the ministry decide not to give infrastructure status to airlines?
The amount indicated by the Reserve Bank of India to banks for infrastructure lending is limited. Within that, our intension is to put people who really contribute to infrastructure from the civil aviation chain. Now, the issue is if aircraft acquisition gets infrastructure status, tomorrow, transport companies will ask for similar status for trucks. Ports will seek this for ships. We cannot do it on a standalone basis. There will be similar demands from various sectors, which will be difficult to meet.
Why were maintenance, repair and overhaul (MRO), ground-handling, cargo and aviation fuel given infrastructure status?
It is because these are co-located with airports. If you look at airport as infrastructure, can you imagine airport without cargo or MRO or aviation turbine fuel? The idea is anything that helps an airport meet its obligation should be a part of infrastructure.
Talking of airports, is privatisation back on the table?
At the moment, we don't plan to privatise any airport. But it is not as if we have shut the door. This is something that isn't under active consideration.
The policy states AAI will monitor the capital expenditure of airports in a public-private partnership (PPP) model. Why?
Suppose AAI decides to go for airport development anywhere (through PPP), the airport should not be very expensive. The idea is to create a good and functional airport. That's the point. If I can create an airport with Rs 2,000 crore, I should not spend Rs 6,000 crore for developing that airport in PPP mode.
Are airport costs going haywire as of now?
I wouldn't say those were going haywire. But what we certainly could have done is put greater emphasis on the functionality of an airport. We should look at functionality with a modular construction.
Would allowing airlines to self-handle airport operations take away the business of ground-handling agencies?
That would depend on whether the agency has a competent rate or not. Usually, the services offered by ground-handling agencies are cheaper compared to self-handling. But where the ground-handling agency has some kind of a monopoly on the airport, it will be broken, as airlines will do self-handling. This is more of a check to ensure agencies' rates remain reasonable.
Do you think you will be able to bring on board all stakeholders through this policy?
Most, but not everyone. It's never easy to satisfy everybody. The biggest takeaway is the common Indian will begin to fly and the kind of revolution seen in the telecom sector will take place in the civil aviation sector, too.
Is more liberalisation on the cards?
It is certainly possible if the numbers keep on increasing like this and competition grows. After all, in the telecom sector, the call rates were determined by the Telecom Regulatory Authority of India. However, with huge competition, the rates started falling without the need for regulation. In a similar manner, there are many regulations (in the aviation sector). If the market matures and competition becomes intense, why should we regulate? Market forces will take care.
ON KEY ISSUES
What do open skies beyond 5,000 km mean for Indian carriers?
We must understand that we have to strike a balance between protecting Indian carriers on the one hand and the need to provide better connectivity to passengers on the other. This is because once we provide better connectivity, there will be a huge increase in tourist traffic. Those currently going somewhere else due to poor connectivity will come to our country. There has to be a balance. It is because of this balance that we have said countries within a 5,000-km radius will be taken up after five years. As you are aware, the biggest competitors of Indian airlines are from within 5,000 km; so, it is calibrated competition.
Let's say an airline wants to fly to Delhi from Frankfurt (Germany) and then go to Colombo (Sri Lanka). Would that be allowed?
We will work out all those details. Whether we will allow what is known as the fifth freedom (an airline from a country having the rights to fly between two other countries) or not hasn't been firmed up. These details will be worked upon once the policy is finalised after receiving all inputs. Also, whether there should be open skies to all the cities in the country or to limited cities are details that will be part of the final policy.
Please explain how the auction route will work for short-haul destinations.
Let's say an airline from France has exhausted all the entitled 10,000 seats but domestic carriers are able to use only 2,000; French airlines will want more. However, domestic carriers will oppose this, saying 'why should we give more (seats to them) and allow them to take away my business when I have not been able to utilise my pot'. In such a scenario, we will tell the foreign carrier we will give, let's say, 2,000 more seats, over and above the entitlement. The additional seats will be bid out for travelling to cities such as Delhi and Mumbai.
Will this be restricted to metro routes?
We need to work that out. I am explaining the methodology alone. We will bid out seats at different India airports, over and above the existing bilateral entitlement, without any reciprocity.
Will this comply with International Civil Aviation Organization norms?
Yes. Countries are free to do so. The only thing is there won't be a bilateral agreement (while bidding), as I am offering the seats unilaterally.
The policy talks about raising the foreign direct investment (FDI) cap from 49 per cent to more than 50 per cent only if the skies are completely opened in 2020. Does that mean an increase in the FDI cap will be considered only after 2020?
We are saying a thought will be given when there are open skies after 2020. But nothing prevents the government from doing it (raising the cap) before that. When you enter into an open-skies arrangement, a distinction between Indian and foreign carriers isn't valid. So, when is no restriction on flying to and from the country, how does it matter whether domestic or Indian carriers substantially owned by foreign players are flying out?
Does that mean complete liberalisation of FDI?
Whether partially or completely, but it could be liberalised.
We are still stuck at altering the '5/20 rule'. Why was there no clarity on this?
Clarity will come once the policy is implemented. These are just suggestions, which aren't applicable today. It is only a draft policy put in the public domain for consultation; it will become a policy only after the approval of the Cabinet.
Can we say we will move in the direction of liberalising the 5/20 norm?
I cannot say that. On that issue, we have a completely open mind and all stakeholders' view will be taken into consideration before we take a final decision.
Why was there a need to retain the route dispersal guidelines (RDGs)?
It is necessary for us to ensure air connectivity to remote parts of the country. We cannot do away with it. That's the main reason. If we remove this requirement, connectivity will be purely determined by commercial considerations. If it is purely commercial, it is possible several destinations in remote regions might fall off the connectivity map.
But wouldn't that be resolved with the regional connectivity scheme?
We don't want to do that. There is no compulsion to fly on regional routes in this scheme.
Airlines complain they cannot withdraw existing operations from non-profitable routes through RDG. What is the need for that?
The need for connectivity to remote areas is greater than the commercial needs that dictate the routines of airlines. That is why we created a system known as the RDG, which provides for internal cross-subsidisation. Airlines make money on profitable routes and some portion of the profit is used to fly to remote regions because the law requires them to do so. We will need such a mechanism, as many remote areas will not be served otherwise.
Did the ministry check whether airlines are breaking-even on remote routes?
As I mentioned, if they were breaking-even or making money, we didn't need RDGs. So, the rationale is in some areas, they might not make money but it is desirable and necessary that they fly there for connectivity.
How many low-cost airports will be developed through this scheme?
Under the regional connectivity scheme, we will revive airports for which there is demand from airlines. Suppose, I revive Purnea in Bihar but I realise no airlines wants to go there. We will not go and do that in advance. We will ask the airlines 'which are the regional airports in the country where you wish to go?' So, I cannot fix a target right now. All I can say is the Airports Authority of India (AAI) has the wherewithal to develop these underused airports as no-frills ones, depending on the demands from airlines.
Would the regional connectivity scheme be applicable only to regional airlines, as mentioned in the policy?
It will also be available to others. But we don't think other carriers will go there at all. You can't take a 250-seater aircraft flying 20 passengers to such remote routes.
Do you think national carriers will take up the scheme?
That is up to them. It depends on an airline's business model. Normally, airlines don't like multi-configuration aircraft. It's difficult to have separate facilities for them. In this case, these airlines might decide to have a subsidiary for regional connectivity.
How much will be collected by levying two per cent cess on air tickets?
Around Rs 1,500 crore every year
Why did the ministry decide not to give infrastructure status to airlines?
The amount indicated by the Reserve Bank of India to banks for infrastructure lending is limited. Within that, our intension is to put people who really contribute to infrastructure from the civil aviation chain. Now, the issue is if aircraft acquisition gets infrastructure status, tomorrow, transport companies will ask for similar status for trucks. Ports will seek this for ships. We cannot do it on a standalone basis. There will be similar demands from various sectors, which will be difficult to meet.
Why were maintenance, repair and overhaul (MRO), ground-handling, cargo and aviation fuel given infrastructure status?
It is because these are co-located with airports. If you look at airport as infrastructure, can you imagine airport without cargo or MRO or aviation turbine fuel? The idea is anything that helps an airport meet its obligation should be a part of infrastructure.
Talking of airports, is privatisation back on the table?
At the moment, we don't plan to privatise any airport. But it is not as if we have shut the door. This is something that isn't under active consideration.
The policy states AAI will monitor the capital expenditure of airports in a public-private partnership (PPP) model. Why?
Suppose AAI decides to go for airport development anywhere (through PPP), the airport should not be very expensive. The idea is to create a good and functional airport. That's the point. If I can create an airport with Rs 2,000 crore, I should not spend Rs 6,000 crore for developing that airport in PPP mode.
Are airport costs going haywire as of now?
I wouldn't say those were going haywire. But what we certainly could have done is put greater emphasis on the functionality of an airport. We should look at functionality with a modular construction.
Would allowing airlines to self-handle airport operations take away the business of ground-handling agencies?
That would depend on whether the agency has a competent rate or not. Usually, the services offered by ground-handling agencies are cheaper compared to self-handling. But where the ground-handling agency has some kind of a monopoly on the airport, it will be broken, as airlines will do self-handling. This is more of a check to ensure agencies' rates remain reasonable.
Do you think you will be able to bring on board all stakeholders through this policy?
Most, but not everyone. It's never easy to satisfy everybody. The biggest takeaway is the common Indian will begin to fly and the kind of revolution seen in the telecom sector will take place in the civil aviation sector, too.
Is more liberalisation on the cards?
It is certainly possible if the numbers keep on increasing like this and competition grows. After all, in the telecom sector, the call rates were determined by the Telecom Regulatory Authority of India. However, with huge competition, the rates started falling without the need for regulation. In a similar manner, there are many regulations (in the aviation sector). If the market matures and competition becomes intense, why should we regulate? Market forces will take care.
ON KEY ISSUES
- On opening skies beyond 5,000 km
- On 5/20
- On low-cost airports
- On privatisation of airports
- On civil aviation policy
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