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27 Mar, 2013

Minister Outlines Plans to Make India the Biggest Aviation Market by 2020


Ministry of Civil Aviation, 26-March, 2013 – Speaking at a function in the capital on the occasion of Aviation Day, the Minister for Civil Aviation, Mr Ajit Singh said that, India would be the third largest aviation market by 2020. Addressing senior representatives of the aviation industry, Shri Ajit Singh informed that studies suggest, the countries airports would be handling 336 million domestic and 85 million international passengers with projected investment to the tune of US$ 120 billion by 2020.

The Minister reminded the gathering that recently he took a decision to liberalize the process for airlines to acquire aircrafts by doing away with the Aircraft Acquisition Committee. He added that the Government has also taken steps to liberalize and grant traffic rights to Indian carriers to fly to new destinations around the globe. Following is the entire text of the Minister’s speech:

It is really heartening to see that the first-off “Aviation Day” in India is being organized with the focus on economic benefits that aviation brings to the Indian economy. I am told that the most important branches of the Aviation value chain which are critically linked and interdependent including the airline industry, the airports and manufacturing, engineering and service industry through the CII are jointly organizing today’s session. I hope this realization of interdependencies among airlines, airport and the industry will also reflect in a growing shared agenda among the three; and reflect the growing areas of synergies between key players from the industry, to work towards the development of the aviation sector in India.  To quote Henry Ford, “Coming together is a beginning; keeping together is progress; working together is success.” I congratulate the organizers for bringing you all together on the “Aviation Day”, a new beginning which I am sure will progress into success.

As we know, aviation sector brings enormous benefits to communities and economies around the globe. It is a key enabler of economic growth, social development and tourism providing connectivity and access to markets globally.Air transport currently supports 56.6 million jobs and over US$2.2 trillion of Global GDP.

India is among the countries witnessing highest growth in air passenger traffic. Its airport infrastructure is undergoing modernisation with the installation of state-of-the-art facilities. New Greenfield airports are under construction and security, surveillance and air traffic navigation systems have been modernized. India, a growing Asian economy, is amongst the fastest growing and currently the 9th largest aviation market handling 121 million domestic and 41 million international passengers. Today, more than 85 international airlines operate to India and 5 Indian carriers connect over 40 countries.

The studies suggest that by the year 2020, India is likely to become the 3rd largest aviation market handling 336 million domestic and 85 million international passengers with projected investment to the tune of US$ 120 billion. Indian Aviation Industry has been instrumental in the overall economic development of the country. I am told that Oxford Economics report commissioned by IATA indicates that Aviation accounts for 1.5% of India’s GDP and supports 1.7 million jobs – with a further 7.1 million employed in other sectors including tourism through the catalytic effects of aviation.

The prospects and possibilities of growth of   Indian aviation markets are huge.The gap between potential and current  air travel penetration shows that India  is presently at 0.04 air trips per capita per annum  which is far behind developed countries like US and Australia (more than 2 air trips per capita per annum), China and Brazil (0.3 air trips per capita per annum). The Low ratio of per capita air trips in India suggests a huge potential for the air traffic growth considering a relatively higher trajectory of economic growth in the country coupled with necessary Government support.

“The journey of a thousand miles begins with small steps.”We have taken number of initiatives to create an enabling environment for rapid growth of civil aviation sector in India. The single most important policy decision which may transform the civil aviation sector in India has been, to allow 49% FDI by the foreign carriers in domestic airlines. The ceiling of 49% is quite high as compared to other foreign countries where on an average it is kept as 26%. This also shows the Government’s firm commitment towards reforms in this sector. I am happy to know that some Indian carriers have already started exploring the possibilities of foreign collaboration which will boost civil aviation not only in India but in other parts of the world.

You are all aware, that the cost of ATF constitutes the major component of the cost of operations of airlines in India. One of the important reasons of higher cost of ATF in India is the added burden of sales tax levied by the State Governments. To reduce this burden, the Government has decided to allow direct import of ATF by Indian carriers. I am told that all major Indian airlines are exploring the possibilities of importing ATF. There are initial difficulties in putting the whole system in place for import of ATF in terms of sharing of on-site and off-site infrastructure for transport of ATF. We are in discussion with the Petroleum & Natural Gas Ministry in this regard to bring ATF notified under PNGRB Act. Besides, I am also trying to persuade various State Governments to bring down the rate of sales-tax on ATF.

Recently, we have taken an important decision to liberalise the acquisition of aircraft by the scheduled, non-scheduled airlines, flying institutes and for private use. At present prior permission from the Ministry of Civil Aviation is required before the acquisition of aircraft by them through Aircraft Acquisition Committee. Henceforth, no permission for acquisition of aircraft will be required from the Ministry of Civil Aviation and they will be free to acquire aircrafts as per their business plan and requirements. I am sure, this policy decision will give impetus to the growth and expansion of airlines in India.

To give a big boost to international air travel, the Government has taken substantial steps to liberalize and grant traffic rights to Indian carriers to fly to several new destinations across the globe. In order to ensure better advance planning on the part of airlines, the Ministry of Civil Aviation as a long term plan has already allocated the traffic rights to Indian carriers for next two years i.e. Summer-2013 and Winter-2013. The new traffic rights have opened up several new international sectors and increased the overall traffic entitlements of the airlines by approximately 60% over the existing traffic rights. Only in Gulf and South East Asian countries, there is an enhancement of approximately 81,000 seats per week in the entitlement of Indian carriers which is about 80% more than their present entitlements. Now with liberalised aircraft acquisition policy, I hope our airlines will be able to utilize all these bilateral rights bringing enormous benefits to the Indian public.

Another area which has given wings to the growth of Indian civil aviation is the privatization of four major airports under JV/PPP model and the policy of development of Greenfield airports which envisages synergy between the public and private sector.  Keeping pace with the Government policy, the Airports Authority of India has also completed the expansion and upgradation of two metro airports at Kolkata and Chennai and has undertaken the development of 35 selected non-metro airports. The Government would like the AAI to run these airports including metro airports at Kolkata and Chennai by engaging  professional airport operators on the management contract through a global competitive bidding process. Further accelerating the modernization and development process, Indian Government envisages an investment of US$ 12.1 billion at Indian airports under the 12th Five-Year Plan, of which a contribution of about US$ 9.3 billion is expected from the private sector.

The Government has also unleashed the potential of development around airports by simplifying the building regulations. Henceforth no prior permission will be required for construction activities around airports if the builder constructs the building within the permissible height limits which will be marked by AAI on coloured maps.

Despite rapid growth of civil aviation in India, the benefits of air transport have not reached the smaller cities and remote and difficult areas of the country. To make the growth in this sector equitable and inclusive, my top priority is to provide connectivity to these areas. Apart from the development of low-frill airports and modification of Route Dispersal Guidelines,the Government is in the process of formulation of a policy for promotion of regional and remote area connectivity in India incentivising the Indian carriers to operate on these routes including code sharing and seat credit mechanism.

While the aviation sector has undergone an exponential increase in traffic and aircraft movements, we have found that the safety regulatory apparatus has not kept pace with the requirements of the sector. The Directorate General of Civil Aviation (DGCA) has found itself constrained functionally and administratively to respond to the growing requirements of business. The Government is in the process of introducing a bill in Parliament which will enable replacing the existing DGCA with a more autonomous Civil Aviation Authority. The CAA will be a self-funding entity and shall have financial and operational autonomy.

India has the potential to be an MRO hub due to the growing aircraft fleet, location advantage and availability of technical manpower. To facilitate the growth of MRO Business and to make it competitive, the Government of India has recently announced several concessions in budget for 2013-14 which include extension of time period allowed for utilisation of aircraft parts and equipments from three months to one year, exemption of custom duty on parts, equipments, accessories, spares required for MRO purposes to private category aircraft also and inclusion of foreign airlines for the purpose of duty-free imports of parts etc. as applicable for scheduled air transport services.  I am told these concessions have been widely welcomed by the industry.

The Government has recently cleared Flexi Use of Airspace by civil and military users. Implementation of FUA through civil and military coordination is an essential requirement to foster the air travel growth with ultimate benefit to our economy. I expect that there will be a reduction of carbon emission by about 7 million kg. per annum by direct routing between 7 major city pairs only because of FUA.

I am aware that airline industry in India is undergoing a very challenging period because of high cost structure coupled with global economic slowdown. I am sure, various initiatives the Civil Aviation Ministry has taken, will have a positive impact on the growth and competitiveness of the airlines in India.   There are still number of policy issues which have drawn my attention and we are in process of taking decisions on these issues to further the process of reforms.  Technology upgradation in the field of air navigation is one of the most important areas for the overall efficiency and safety of entire Indian civil aviation industry. The creation of ANS Corporation from the existing AAI is one of the top most priorities of the Government so as to boost the pace of modernisation and upgradation of technology in the field of air navigation.

The development work of Navi Mumbai airport may not likely begin as envisaged. To ease the pressure on the existing Mumbai airport, Government has taken an initiative to develop Juhu airport which will augment the capacity of existing Mumbai airport.   KPMG has already submitted a report in this regard and I have also discussed it with the Chief Minister of Maharashtra during my recent visit to Mumbai.

We also need to take all measures to facilitate operations by the airlines to bring efficiency and competitiveness in their operations.  Hence, there is need to streamline and liberalise various procedures in DGCA in view of the development of modern technology and the changed civil aviation requirements without compromising safety and security of air travel. I have asked the DGCA to explore the possibilities in this regard.

I am extremely pleased to be a part of ‘Aviation Day’ function where the key-players of the industry including airline industry have gathered to jointly work towards the development of civil aviation sector in India. I am sure that the collective knowledge, wisdom and experience which all of you have brought here together will be of great help in improving and strengthening the civil aviation sector in India. Let me assure you all that the Government is committed for a liberal and enabling policy environment to provide safe, secure and affordable air services with world class aviation infrastructure in the coming years.

I would welcome new innovative suggestions in this regard.“A mind is like a parachute, it doesn’t work if it is not open.” Give us ideas and suggestions with open mind. I assure that my Ministry will also consider them with open mind. Once again, I extend my best wishes for the success of not just this Aviation Day, but also every single day where Aviation continues to play an important and critical role in our lives.

Thank You. Jai Hind.