Approach:
• Give a brief introduction about the civil aviation sector in India.
• Highlight the challenges faced by the civil aviation sector.
• State the steps taken by the government to address these challenges.
• Conclude with a few additional measures required for the growth of aviation sector.
Answer:
India is the third largest aviation market in the world, with approximately 16% air passenger traffic growth over the past decade. However, the aviation sector still remains a risk laden business with huge capital expenditure requirement and low profit margins.
The challenges faced by the civil aviation sector are:
• Inadequate infrastructure: Due to the rapid expansion of India’s civil aviation sector, airspace, parking bays and runway slots will become increasingly scarce over the next few years. For example, airports in Mumbai and Chennai are already close to saturation due to unavailability of land.
• Lack of skilled workers: To keep up with expansion, about 0.25 million persons will have to be skilled over the next 10 years. However, training is constrained by shortage of instructors, lack of assured supply of aviation gasoline used in training aircrafts etc.
• Aviation safety: Various international authorities like the International Civil Aviation Organization have raised concerns on the aviation safety measures followed in India.
• Rupee fluctuation: Indian rupee’s depreciation adversely affects airline carriers. About 25- 30% of their costs such as aircraft lease rents, maintenance costs to ground handling, parking charges abroad etc. are dollar denominated.
• High taxes on aviation turbine fuel (ATF): High ATF costs coupled with regional disparities in its price increase the expenditure of the carriers. Further, expensive ATF makes it difficult to compete with aviation hubs like Dubai and Singapore, which charge far lower rates.
• Low profits: High costs owing to GST in the range of 5-28% on aircraft engines and spare parts, intense domestic competition and price sensitivity of passengers make it difficult to increase profit margins.
Low domestic air cargo growth: International cargo, comprising 60% of the total air cargo handled in the country, logged a growth of 15.6%, while domestic cargo grew by only 8%.
Various steps taken by the government in this regard include:
• National Air Cargo Policy, 2019: It envisages making Indian air cargo and logistics the most efficient, seamless and cost effective globally by the end of the next decade.
• Encouraging private sector participation: Foreign investment up to 49 per cent has been allowed under automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. Further, the government has also approved management of several airports under PPP.
• Regional connectivity: Through the UDAN scheme, the government has added numerous small airports to the Indian aviation circuit, propelling the sector’s growth construction of Sikkim’s first airport etc.
• Domestic manufacturing: The government is working on a blueprint to promote domestic manufacturing of aircrafts and aircraft financing.
• Improvements in service and hospitality: Through Project DISHA (Driving Improvements in Service and Hospitality at Airports), the Airport Authority of India plans to upgrade the existing airports in order to enhance operational efficiency.
• Safety measures: It includes issuing of detailed instructions to the airports by the Bureau of Civil Aviation Security to curb movement of unauthorized arms, contraband goods and conducting surprise inspections etc.
Alongwith these steps, the government should focus on increasing financial investment in the sector, encouraging domestic airlines to maintain debts in manageable proportions and promote fair competition between them to meet the full potential of the sector.
