By Ashwath Komath

Edited by Michelle Cherian, Associate Editor, The Indian Economist

India’s aviation sector is very rapidly growing. This is also partly due to the emergence of several new budget airlines such as Indigo, GoAir, Spicejet and the others. The aviation sector has come a long way from remaining in the state monopoly with Indian Airlines and Air India, but clearly, there is a lot more that needs to be done.

Even though the sector is growing, the potential for the aviation sector has been rather stifled by a multitude of reasons such as poor bureaucracy, antiquated laws, lack of reforms and the like. The debate on civil aviation comes about with the question of Foreign Direct Investment in Aviation.

But before we talk about attracting foreign investors to invest in the Aviation sector, what needs to be understood is that there are some very serious structural problems with the sector that will repel investors if not fixed soon. The debate about civil aviation has always remained restricted to the FDI debate, when the problems of the sector have not only been keeping investors out, but also been stifling the capacities of the domestic airlines.

Ending the Air India obsession

To begin with, the Ministry of Civil Aviation not only has to juggle the roles of regulating the many airlines operating in India, but also to run the day-to-day affairs of the National Airline. This is quite visible, especially was during the UPA government with Praful Patel as Civil Aviation Minister taking personal interest in Air India and going about spending valuable public funds in all sorts of corporate decisions which in the end went waste. Even then, Air India was a white elephant which kept soaking up public resources to stay afloat and still made losses.

This obsession effectively diverted the ministry’s attention to the wide ranging problems within the ministry and the aviation sector itself. While it was supposed to be acting as a stronger watchdog and also drafting policies which would help the sector, it didn’t do any of that.

The best idea here, would be to disinvest Air India and let private players manage the airline professionally without granting any kind of protection that it does not deserve, especially with so many upcoming airlines in the industry doing well without external assistance.

Reforming Civil Aviation legislation

Civil Aviation legislation in India is rather regressive and is rarely updated. India still has laws that goes back to the pre-1991 License-Raj era, such as the rule that Indian airlines can’t fly abroad unless they finish five years of operations with a fleet of 20 flights. So when the gap made by these laws are filled by foreign airlines, then the ministry comes up with another brilliant idea to impose quotas of seats on these airlines to determine the share of the market each foreign airline can occupy.

Now this is moronic for the simple reason that it stinks of old bureaucratic controls which stifle the market and diminish the potential of the Indian airlines rather than protect it. India is the only country that imposes such quotas in Civil Aviation and it is quite shameful. The Ministry is trying to stifle private airlines by not letting them decide what routes they would want to operate.

Given that the airline industry globally is one of the most competitive industries in the world and that profits are determined by a careful planning of routes, any such policy only denies these airlines to remain profitable, which is a result of legislation that makes no sense and in no way helps even the government. This also becomes a matter of contention during the negotiation of Open-Skies Agreements with other countries.

Reforming the DGCA

The Directorate-General of Civil Aviation is the executive branch of Civil Aviation which acts as the regulatory body of Indian Civil Aviation. So it would be the DGCA who is responsible for decisions like the kind of qualifications pilots should have or the frequency of an aircraft being sent for inspection and several others. It is the operational arm of the Ministry of Civil Aviation and is one of the most important offices. Its equivalent would be the Federal Aviation Administration (FAA) of the United States of America.

The DGCA is known to be really corrupt and lax when it comes to imposing standards on airlines. The DGCA has poor compliance and inspection standards. This is worrisome, given that it is the DGCA which is also responsible for airline safety. If the DGCA is not professional enough, it could result in some serious safety issues. Recently the FAA downgraded the DGCA over its aviation safety. When such a downgrade happens, it means that India cannot add more flights to the USA, which hurts a lot of Indian airlines commercially, and more importantly, it puts passengers in the air at risk. This could have been avoided had the DGCA been more responsible.

Aviation infrastructure

The aviation infrastructure in India is not commensurate with the kind of growth projections which have been made for the Indian aviation sector. The construction of new airports is slow and is not large enough to accommodate growth for the future. For example, when the new Bangalore airport was constructed in 2008, it required an expansion by 2012, barely four years in operation. This shows that there is very little foresight in aviation planning.

Airports need to be built in greater numbers in Tier-II cities, to improve their connectivity and help airlines expand their reach. The process of doing so is painfully slow and sometimes not even existent. For example, there were plans to open a new airport in Pune in order to relieve the pressure on the current airport which also is an Air Force base. The efforts to find land for a new airport have simply stopped and it has led to pressure on the already saturated airport at Pune. This is the kind of inactivity that retards the growth of this industry, rather any industry in India.

When it comes to aviation infrastructure, it is best to understand the efforts of the Chinese, who have built new airports and upgraded old ones to support the growth of the aviation sector for many decades to come. So the addition of several new gates, new runways and new terminals spread across the place in bulk is necessary for aviation to become more profitable and to increase the connectivity.

This brings to mind another redundant legislation which says that two airports cannot operate out of one city. This again, makes no sense. There are several cities around the world which have multiple airports operating. Some famous examples include London, New York, Tokyo, Dubai, Istanbul and others. Given that there exist multiple airports in cities like New Delhi, Bangalore and Hyderabad, it doesn’t seem reasonable to not use both facilities, simultaneously to ease congestion. This is especially true as the city expands and there is a need for more airfields. Again, redundant legislation is what is choking growth.

Conclusion

There needs to be some serious reforms in a lot of places for a lot of reasons. While growth is important, these redundancies harm more than just sectoral growth, they also hamper the functioning of the industry and also put passengers at risk and discomfort. Also, if the Ministry of Civil Aviation has any grand ideas, which they think will help protect the Indian Aviation Sector from foreign competition, they might want to think again. Foreign carriers are eager to have a piece of the large Indian market because of the sheer numbers and the scale in which they can operate, but such policies are guaranteed to drive them away.

Aviation is a sector which is best left to the market forces than trying to control it by old bureaucratic ways. The best way for the government to aid the growth of aviation is to spend on the infrastructure and to reform itself. This is something that the Ministry of Civil Aviation better understand soon, because otherwise it might be too late.

Ashwath is a graduate in Political Science from Fergusson College, Pune. He is an aspiring diplomat and hopes to join the Indian Foreign Service someday. He enjoys writing about foreign policy, international security and international affairs. When he is not writing or reading, he enjoys playing pool with his friends, watching foreign cinema and listening to instrumental music.

 

Posted by The Indian Economist | For the Curious Mind