Unnecessary Govt intervention in aviation

   By Ravi Shanker Kapoor ,  14-Jan-2019
Unnecessary Govt intervention in aviation

If it ain’t broke, they say, don’t fix it. That is, if something is working properly, it makes no sense introducing any change. The powers that be in our country, however, do exactly the opposite: they keep meddling in the areas in which everything is functioning satisfactorily. The aviation sector is a recent instance.

If it ain’t broke, they say, don’t fix it. That is, if something is working properly, it makes no sense introducing any change. The powers that be in our country, however, do exactly the opposite: they keep meddling in the areas in which everything is functioning satisfactorily. The aviation sector is a recent instance.

“The government has proposed to cap the number of take-off and landing slots an airline can hold in congest airports,” reports Business Standard (January 14). “The move, which could turn out to be controversial, is meant to check monopolistic growth of airlines.” This is unnecessary activism on the part of the government in a sector that is doing fine.

“The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years,” this is what a website owned by the Ministry of Commerce & Industry says. “India is currently considered the third largest domestic civil aviation market in the world. India has become the third largest domestic aviation market in the world and is expected to overtake UK to become the third largest air passenger market by 2024.”

One would have expected our politicians and bureaucrats let it grow unhindered by unwarranted officiousness. But this is not to be. The government wants to limit the percentage of slots a carrier can hold in any congested airport. When that threshold is reached, it will get the last in preference of slots, getting it only when other airlines reject it.

To be fair to the officialdom, we must mention here that corporate bickering is also responsible for the proposed policy rejig. New entrants like Vistara and AirAsia India have been campaigning for a change in the slotting system, claiming that the present one is tilted in favor of the established players.

This gives an excuse to politicians and bureaucrats to intervene, and such interventions are usually more than necessary. The fear is that the proposed one would also be such.

This would be unfortunate because aviation is on a roll in India. Passenger traffic grew at 16.52 percent year-on-year to reach 308.75 million in the last fiscal. In fact, the compounded annual growth rate or CAGR during FY06-FY18 was 12.72 percent. Of this, domestic passenger traffic grew YoY by 18.28 percent to reach 243 million in FY18 and is expected to become 293.28 million in FY20. International passenger grew YoY by 10.43 percent to reach 65.48 million in FY18 and traffic is expected to become 76 million in FY20E.

Consequently, the sector has been receiving the foreign direct investment of FDI. According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI inflows in India’s air transport sector (including air freight) reached $1,658.23 million between April 2000 and June 2018. The government has 100 percent FDI under automatic route in scheduled air transport service, regional air transport service, and domestic scheduled passenger airline. However, FDI over 49 percent requires government approval.

According to official estimates, Indians aviation is expected to get Rs 35,000 crore ($4.99 billion) investment in the next four years. The government itself plans to invest $1.83 billion for development of airport infrastructure along with aviation navigation services by 2026.

Therefore, the need of the hour is minimum government intervention in the sector. Sadly, the official instinct is to maximize meddling.