On the day 4 of economic stimulus package announcement under Atmanirbhar Bharat Abhiyan, Nirmala Sitharaman, Finance Minister, Government of India has announced various reforms for the growth and development of the Civil Aviation Sector. Aviation reforms have been a demand from the industry for a very long time. Also, Civil Aviation has been identified as one of the sectors under the new horizons for growth.
Sitharaman said, “After Prime Minister Narendra Modi’s address to the nation on building an Atmanirbhar Bharat we have been announcing various steps in several tranches to give stimulus, help and give little assistance as a government. PM had also said that we should prepare ourselves for a tough competition and face challenges of global value chain. We are not looking inwards it is not an isolationist policy. Many sectors need policy simplification. Once we decongest sectors, we can also provide necessary boost for growth and employment. PM has a strong record of taking up reforms. Today’s measures will be on structural reforms and for sectors which are new horizon for growth.”
Under the civil aviation sector, Finance Minister announced policy reforms for Airports, Airspace management, and MROs. Out of the total Indian airspace only 60 per cent is freely allowed for commercial aviation usage which is set to be further increased. This will enhance the fuel efficiency, time optimization in the commercial aviation sector. This move will bring a total benefit of about Rs 1000 crores per year for the aviation sector.
Speaking about airspace management Sitharaman said, “Currently, only 60 per cent of Indian air space is freely available, airspace is restricted for civil purposes and defence purposes. Which means all these years we have been flying to our destinations not through the shortest route, which means travellers are spending more time in the air. This has to be rationalized and optimum utilization of air space will have to happen. Even the fuel spent is imported which is expensive and customer ends up paying more price for the ticket. Rationalisation will happen which means we will reach to our destination in short time with less fuel consumption. This is an environmentally friendly step and flying time will reduce and will have a very big implication in India’s fuel import bill. Civil Aviation is up for a big leap and has the biggest potential for growth in India.”
One of the major announcements by the FM is to develop India as a Maintenance Repair and Overhaul (MRO) hub. This step will surely help in reduction of the maintenance cost and also will be a revenue generator.
She further said, “We want to make India MRO hub; this is a very big business. Most of the Indian aircrafts go abroad for maintenance. We have all the capacities, manpower, soft skills, etc in India. We can be the centre for many of the flights going to South East Asia, long distance to Australia and similarly westwards also. We want to make sure that MRO ecosystem is created in India for which the tax regime is already altered. Not only civil aircrafts, but also defence aircrafts will be benefiting from this. Maintenance cost of all airlines will come down which will have a ripple effect on passengers.”
Speaking exclusively to T3 magazine, Bharat Malkani, Chairman & Managing Director, Max AeroSpace and Aviation said, “For the MRO industry it is a huge step as the Government has recognized this industry is of global standards and has a lot of potential. With this move MRO industry will certainly be more competitive in the Global space and also it can be a major employment generator. This is a huge step towards making this industry world-class.”
Also, the Airport Authority of India AAI has awarded three airports out of six bids for Operation and Maintenance on Public-Private Partnership (PPP) basis. The annual revenue of the six airports in 1st round – Rs 1000 crores (against current profit of Rs 540 crores per year).
She further said, “In the round two, six more airports are up for auction and AAI will do it on PPP basis. AAI will get a down payment of Rs. 2300 crore. Additional Investment by private players in 12 airports in 1st and 2nd rounds expected around Rs. 13,000 crores.”
The initiatives by the Finance Minister have been welcomed by the private players. Speaking about the initiative Dr. GVK Reddy, Founder & Chairman, GVK said, “We welcome the announcements made by the government today in the Civil Aviation. The move to invite PPP in six more airports will provide the AAI resources to develop smaller airports across the country and popularise the government’s Udaan scheme. The plans to make India a global MRO Hub will ensure savings of precious foreign exchange and enable Indian airlines to get their aircraft serviced locally. I am sure that the government under Prime Minister Modi’s dynamic leadership, will take many more steps in the coming days to get our Economy back on rails post the Covid-19 crisis.”
Lauding the initiative, Vasudevan. S, Partner, Infrastructure Government and Healthcare, Aviation, KPMG in India said, “The aviation sector is the hardest hit because of the global pandemic with an estimated US$500 billion loss in airline and airport revenues in FY20. The topline impact for domestic carriers and airport operators India is forecasted to be US$ 3-4 billion this fiscal alone. It is heartening, therefore, to see the Government’s announcements addressing three key drivers of business recovery – costs, investments and revenue. Airport PPP transactions will help unlock value for AAI and State governments given current investor interest and long-term potential of the Indian market. Rationalizing the MRO tax structure has been a long pending demand of the industry and it is good to see that happening finally, but more needs to be done to create a level playing field, attract foreign investment and make it profitable. Optimizing use of air space will certainly open up the possibility to cutting fuel burn and improving turnarounds both on domestic and international routes, both likely to have a positive impact on their bottom-lines in a cash-guzzling business. Good tidings for the sector overall, which is in a deep hole right now.”
