High fuel costs, 5/20 rule: Airlines raise issues affecting aviation sector

New Delhi: Top officials of Indian airlines today raised issues afflicting the aviation sector like high jet fuel cost and airport charges as the government said it would soon finalise a policy to enhance connectivity to regional destinations and remote areas.

The issues came up for discussion at a meeting here convened by Civil Aviation Minister Ashok Gajapathi Raju, which was attended by top officials of airlines including Air India, Jet Airways, IndiGo, SpiceJet and start-up Tata-SIA carrier Vistara.

"We wanted to interact with the airlines, take their inputs and hear their problems... We told them that we are trying to evolve a policy to make aviation a vibrant sector," Raju told PTI after the two-hour-long meeting.

Issues like lowering of sales tax on aviation turbine fuel (ATF), the rule which allows an Indian carrier to fly abroad after they operate domestic for five years and have 20 planes, promoting of air connectivity to remote and regional airports and enhanced utilisation of bilateral air traffic rights by Indian carriers, came up for discussion.

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Asked whether the government was considering viability gap funding to promote remote and regional air connectivity, the minister said, "It is not ruled out. But how it can be done is to be examined. In the northeast, it is being done by DONER (Ministry) and for Andaman-Nicobar by the state government."

The Civil Aviation Ministry has come out with a policy on remote and regional connectivity, various provisions of which the airlines have been opposed by the Indian carriers.

The Centre is keen that state governments also join hands to promote air connectivity to remote areas and Tier-II and III cities in various regions.

This would be possible only if operational costs of the airlines are reduced to minimum and the states can contribute by bearing some operational expenses, including slashing ATF tax rates, the minister is understood to have stressed while elaborating on the draft policy on promoting air connectivity to regional and remote areas.

The government also wants Indian airlines to take up more international routes, as large chunks of bilateral air traffic rights have remained unutilised while foreign carriers were using them to a large extent to wean away Indian travellers.

The airlines have raised several objections to the draft policy, saying it would have severe impact on their financial strength. Almost all major airlines, including Vistara, have already submitted their opinions to the Ministry and called for further discussions.

The revised draft policy on air connectivity to regional and remote areas was made public last month by the Ministry, which proposed a major shift in the route dispersal guidelines and promised several incentives and exemption from various charges to airlines which fly to such unconnected places.

Terming the state governments as major stakeholders in improving air connectivity in the hinterland, the policy asked them to take financial measures like slashing VAT on jet fuel and underwriting of some seats to encourage aviation growth.

It also suggests that the state governments should waive electricity and municipal charges like house and property taxes for five years for airport infrastructure.

In their submissions on the draft, the airlines have said the airline industry's financial situation was "very precarious" due to high debt burden and mounting costs.

They said the losses of Indian carriers on routes connecting northeast, Jammu and Kashmir, Andaman and Nicobar Islands and Lakshadweep "continue to be a significant

contributor to these industry losses".

They have also pointed out that the policy requirement to deploy 100 per cent of trunk route capacity on regional routes could cause overcapacity and hence this should be should be reduced to 50 per cent.

Similarly, the Business Aircraft Operators Association (BAOA), which represents private and charter operators, has supported the policy but asked the government to consider capital subsidies, in terms of soft or low-interest loans by banks for purchasing aircraft.

With a new concept of Scheduled Commuter Airline (SCA) being proposed to be introduced for the first time through the policy, BAOA has suggested that there should be flexibility in rules and regulations for the first three years.

PTI