No Consensus Yet On Issue Of 3rd-Party Cover To Airlines

The committee set up to resolve the issue of third-party cover to airlines discussed several options including a per passenger surcharge, a levy on the airlines' revenue and also surcharge that would be based on the insurance premium paid by an aviation company.

The committee whch met today, however, could not arrive at a consensus. New India Assurance chairman and managing director KN Bhandari said after the meeting that the airlines would need more time to come to a final understanding.

He, however, did not reveal the time frame within which the solution would be worked out. Apart from Bhandari, the meeting was attended by Oriental Insurance chairman and managing director BD Banerjee, executives from Indian Airlines and Air-India and finance ministry officials.

The committee set up on October 1 is looking at alternatives to provide third-party insurance cover following the decision of global insurers to cap third-party liability from a single incident or during a year at $50 million.

In such a situation, airlines need to purchase a fresh cover for war and SRCC (strike, riot and civil commotion) which is at present being sold at a high premium. In the absence of a higher third-party cover, airlines can be denied permission to fly over certain areas and may have to ground their leased aircraft.

Following the four air crashes in the US on September 11, insurers decided to hike the war premium and asked airlines to pay an additional $1.25 per passenger.

Insurers had on Monday proposed an additional levy of $3-3.5 per passenger in order to provide a higher third-party cover. Aviation companies have, however, voiced their opinion against any fresh surcharge.

Currently, the third-party liability limit offered by insurers to Air-India is estimated at about $1.5 billion while it is $500 million for Indian Airlines, $300 million for Jet Airways and $150 million for Air Sahara.

The issue of extending a letter of comfort that the civil aviation ministry had sought from the finance ministry would also be decided among the two ministries, an official said.