UPSC Civil Aviation sector

Civil Aviation sector

Indian Civil Aviation sector is awaiting a lot of reforms amidst challenges emerging like government’s decision for non-operationalization of Draft Passenger Charter and high demand for reforms in Aircraft Act.

About:
Draft Passenger Charter: Recently, government has decided not to continue with the Draft Passenger Charter which was unveiled in May, 2018. The charter sought to improve the basic rights of the passengers.
Proposed Amendment of Aircraft Act: To empower Director General of Civil Aviation (DGCA) or a committee under it to impose penalties on airlines and airport operators for violations of regulations and deficiency in services.
Proposed Amendment of Airports Economic Regulatory Authority (AERA) Act to allow private airport operators to charge predetermined tariffs and attracting investors to construct and operate airports.

  • Currently, private airport operators have to approach AERA for permission to revise charges such as user development fee, passenger security fee and landing and
    parking fees.
  • Major airports are to be defined as a civilian airport with annual passenger traffic of over 3.5 million which at present is at 1.5 million.
  • The tariffs charged by major airports are set by AERA.

International Civil Aviation Organization (ICAO) air safety oversight audit: As per provisional figures, India’s score in the ICAO audit has gone up to 74 per cent. It is currently at 57.44 per cent as per the audit done in 2017. Federal Aviation Administration (FAA) of USA has retained the highest safety rating.
SpiceJet operated a test flight (a Bombardier Q400 flight) from Dehradun to Delhi, which partially used biojet-fuel.

Status of Indian Civil Aviation Industry:
Contribution in Indian Economy: The civil aviation sector contributed USD8.9 billion to India’s GDP in 2014 and supported 1.31 million direct, indirect and induced aviation jobs.
• The World Economic Forum’s Global Competitiveness Report, 2018 ranks India as 53rd out of 140 countries worldwide in air transport infrastructure.
Increasing passenger traffic: India’s civil aviation sector has been growing steadily; the number of passengers was 158 million in 2016-17.
• Domestic passenger traffic increased at a CAGR of almost 10 per cent between 2007-08 and 2016-17 and international passenger traffic grew at a CAGR of 8.07 per cent during the same period.

Objectives of India Civil Aviation Industry:
Enhance the affordability of flying to enable an increase in domestic ticket sales from 103.75 million in 2016-171 to 300 million by 2022.2
Double air cargo handled from about 3.3 million tonnes in 2017-18 to about 6.5 million tonnes.
Expand the maintenance, repair and overhaul (MRO) industry from USD 1.8 billion in 2017 to USD 2.3 billion.
Expand airport capacity more than five times to handle one billion trips a year.
Enhance availability and affordability of regional air connectivity and revive/upgrade 56 unserved airports and 31 unserved helipads through the Regional Connectivity Scheme – Ude Desh Ka Aam Naagrik (RCS-UDAN).
Ensure that airport tariffs, taxes on fuel, landing charges, passenger services, cargo and other charges are determined in an efficient, fair and transparent manner.

Constraints and Challenges faced by Aviation Industry:
Capacity and infrastructure: Due to the rapid expansion, airspace, parking bays and runway slots will become increasingly scarce over the next few years,
Skilled workers: According to a study conducted by the Ministry of Civil Aviation, Indian aviation could directly support 1.0 to 1.2 million jobs by 2035.

  • This implies that about 0.25 million persons will need to be skilled over the next 10 years.
  • But there is shortage and gaps in availability of industry-recognised skill.

• High cost to passengers and of air cargo:

  • Tariff determination: The government has mandated that all airports move from a single to a hybrid till structure. It raises costs for airlines and passengers.
  • Taxes on aviation turbine fuel (ATF): Due to high taxes and lack of competition among providers, ATF is relatively expensive in India. It is also outside the ambit of GST which creates high regional disparity in its price.
  • Incidence of GST on Aircraft Leases and Spare Parts: It also raises cost for the sector.
  • Profitless Growth: Rising aviation turbine fuel cost, slowdown in capacity addition, and decline in the value of rupees leading to a scenario of Profitless Growth.
  • Aviation safety: Although, the number of aviation safety violations in 2017 (337) has declined in comparison to 2016 (442), the absolute number still remains high.
  • Security and Terrorism: Rising global terrorism and airports have become preferred targets of terrorist groups.
  • Lack of Draft Passengers Charter: In the absence of such a draft, adequate services to passengers cannot be ensured.

Government Initiatives:
National Civil Aviation Policy, 2016: NCAP 2016 aims to enhance the passenger traffic through UDAN scheme, promote open sky agreement, opening a level playing field etc.
UDAN (Ude Desh ka Aam Nagrik) Scheme: Regional Connectivity Scheme (RCS-UDAN) has been launched under the policy.
Budgetary allocation increased: The allocation of Civil Aviation Ministry has been tripled to Rs 6,602.86 Crore under Union Budget 2018-19.

Way Forward:
Enhance aviation infrastructure: Complete the planned airports under the UDAN initiative in a time-bound manner. Include provisions for domestic hub development while auctioning traffic rights.
Increase investment in the sector through financial and infrastructure support: Reduce taxes on MRO services and consider granting infrastructure status for MRO. Monetize vacant real estate near AAI airports in all major centres of traffic to increase non-aeronautical revenues.
Address shortage of skilled manpower: Promote collaboration between original equipment manufacturers (OEMs), industry and educational institutes to teach the latest concepts in the aviation industry including management principles, IT in
aviation, etc.

  •  Formulate long-term plans for advanced research in aviation technologies.
  •  Expedite commencement of courses by the National Aviation University.

Promote air cargo growth: Promote “Fly-from-India” through the creation of transhipment hubs. Develop an integrated digital supply chain or e-cargo gateway based on the National Air Cargo Community System (NACCS) platform. The modular
development may include the following digital business enablers as plug-ins:

  • e-contracting/booking of cargo – with access to financial payment gateways.
  • e-transportation multimodality (road-air first/last mile connectivity).
  • e-compliances (initially online clearances by six participating governmental agencies; rest to follow).
  • Cargo Sewa – a grievance redressal module linked to Air Sewa.

Ease the regulatory environment for airports: Deregulate further and open up the aviation market. Adopt a consistent model for tariff determination so that it reduces passenger cost. And, align taxation and pricing structure to global benchmarks by bringing Aviation Turbine Fuel (ATF) under the rubric of GST.
Prioritize aviation safety: Shift focus to pre-empting and preventing accidents/incidents. There should be zero tolerance of safety violations. DGCA should continue ensuring real time safety tracking and prompt incident reporting.

Bio Jet Fuel
• It is an alternate energy source made from vegetable oils, sugars, animal fats, and even waste biomass, and can be used in existing aviation jet engine without modifications
• Jatropha oil is suitable for conversion to jet fuel, other sources are Nahor oil, Sapium oil, Waste cooking oil, mustard family non-edible rotation crops, etc.
• It will be helpful to meet the goals of ICAO’s CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation).

National Civil Aviation Policy, 2016
Regional Connectivity Scheme: Airfare of about Rs. 2500 per passenger for a one-hour flight.
Bilateral Traffic Rights: Indian Government will enter into ‘Open Sky’ on a reciprocal basis with SAARC countries and countries located beyond 5000 km from Delhi
Ground Handling Policy: It will be replaced by a new framework where the airport operator will ensure that there will be three Ground Handling Agencies (GHA) including
Air India’s subsidiary/JV at all major airports as defined in AERA Act.
Encourage development of Airport by AAI, State Governments, the private sector or in PPP mode.
Aviation Security, Immigration and Customs: Ministry of Civil Aviation will develop ‘service delivery modules’ for aviation security, Immigration, Customs etc.
Helicopters and Charters: Separate regulations for helicopters will be notified by DGCA.
• Incentivization of Maintenance, Repair and Overhaul (MRO): The MRO business of Indian carriers is around Rs 5000 crore, 90% of which is currently spent outside India.
Aviation Education and Skill Building: All training in non-licensed category will conform to National Skill Qualification Framework standards. MoCA will provide full
support to the Aviation Sector Skill Council.
Route Dispersal Guidelines has been provided for better categorization of traffic routes.
5/20 Requirement was replaced with a level playing field.