With an aim to push the growth of the aviation sector, a number of policy decisions are being considered that will further promote air connectivity.
Infrastructure creation through modernisation of existing airports and the development of low-cost airports to promote air connectivity, particularly to remote areas, is a priority for the Narendra Modi-led government. The aviation sector in India requires tremendous infrastructural push. According to industry experts, airport density in India is one of the lowest among other countries with similar economies across the world. It is time that a large network of airports is developed, which will not only enable a larger set of people to use this mode of transportation, but also play a crucial role in enhancing remote and regional connectivity.
However, the aviation sector is being tremendously burdened with high duties and taxes, making it difficult to attain viability. Industry players have been stressing that these duties and taxes need to be relooked at immediately. And the government has taken heed to the call. In a bid to reduce the burden of the passengers of the high operation and flying costs, the Ministry of Civil Aviation is reviewing management contracts to private operators at six airports in the country, to shield airlines and passengers from high user charges. Once the modalities are drawn up, the ministry will take approval from an inter-ministerial group to award management contracts at airports in Chennai, Kolkata, Lucknow, Guwahati, Jaipur and Ahmedabad. Privatisation of these airports was given a go-ahead in the previous government´s regime.
Creation of regional infrastructure is the primary focus of the government at the moment to facilitate the growth of airline connectivity across small towns and cities. The Airports Authority of India (AAI) is all geared up to provide modern infrastructure at all airports in the country. ¨AAI plans to operationalise and develop 50 ´No Frills´ airports in Tier-II and Tier-III cities, aimed to provide seamless air connectivity to every corner of the country,¨ says Sudhir Raheja, Chairman & Member (Planning), AAI. Annual growth in air traffic over the next two years is expected to be around 10-12 per cent in inter¡national, 6-8 per cent in domestic and 8-9 per cent overall. The government also plans to construct 15 additional airports under the greenfield airport policy by identifying the most suitable low-cost viable model that will help the growth of the sector.
However, greenfield expansions have been facing challenging times as difficult land acquisition, relief and rehabilitation and stringent green norms are emerging as challenges to successful execution of these projects. ¨Aviation in India is facing critical challenges in terms of an unfavourable policy environment, high taxes, over-regulation and excessive bureaucracy. The Indian aviation industry continues to grapple with inordinate delays in infrastructure creation and escalating costs, limiting air connectivity to the common Indian and jeopardising the financial viability of industry players,¨ says Amber Dubey, Partner and India Head, Aerospace and Defence, KPMG and Chairman-Aviation at CII.
Dubey further adds that in order to become a top aviation market, all-round improvements are required in airports, airlines, air navigation, air-cargo, MRO and aviation training. India needs to broaden the base of domestic flyers. Air connectivity in Tier 3/4 cities needs to be developed and the proposed Essential Air Services Fund (EASF) would help partly address the financing challenges. ¨Government policies and regulatory framework need to be visionary, proactive and based on regular engagement with industry stakeholders,¨ says Dubey.
With expansions in the fray, there is tremendous opportunity in store for the various players associated with the sector. India´s current MRO market size is estimated to be around $700 million. According to industry estimates, by 2020, the total Indian fleet would double in number, making it critical to have a strong domestic MRO industry. Merely 5-10 per cent of the MRO work for domestic scheduled carriers is carried out in India, while most of the maintenance activities are outsourced to third-party service providers outside the country.
- Garima Pant