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The Minister for Civil Aviation, Mr Rajiv Pratap Rudy, the Chairman of the Committee on Road Map for the Civil Aviation sector, Mr Naresh Chandra, and the committee member, Mr Deepak Parekh, with the report in the Capital on Monday. - - Kamal Narang

New Delhi , Dec. 8

IN a major boost to the domestic civil aviation sector, the Naresh Chandra Committee has recommended that foreign airlines be allowed to pick up a 49 per cent equity stake in the domestic and international scheduled air transport services with the approval of the Foreign Investment Promotion Board (FIPB).

This marks a significant liberalisation over the existing policy which while barring foreign airlines from entering the fray, permits equity participation through foreign direct investment (FDI) up to a 40 per cent stake in domestic airlines.

Besides, in a bid to expedite the process of privatisation of Air India (AI) and Indian Airlines (IA) and facilitate transfer of the management to strategic private investors, the committee has recommended that the Government may consider private placement of the shares of the two airlines with domestic financial institutions (DFIs) and foreign institutional investors (FIIs).

``This consortium should be allowed to appoint a management team of their choice and exit at their volition,'' the committee has said in its report.

With regard to the State-owned helicopter corporation, the committee has recommended that the Government should divest its stake in Pawan Hans Helicopter Ltd (PHHL) and, thereafter, go in for an initial public offering.

Among its other recommendations, the committee has mooted the setting up of a new Aviation Economic Regulatory Authority (AERA) to ensure that there is no abuse of monopoly power by either an airport operator or fuel supply infrastructure at the airports.

Addressing a news conference here, the Minister for Civil Aviation, Mr Rajiv Pratap Rudy, told newspersons that the recommendations of the committee would help the Government in coming up with a new civil aviation policy. ``We hope to have the policy ready before the Parliament by January,'' Mr Rudy said. The committee, which submitted its first report on Monday is to come up with a second report that will work out the ``nitty gritty'' relating to the sector.

While calling for doing away with the route dispersal guidelines, the Naresh Chandra panel has recommended the creation of a non-lapsable Essential Air Services Fund (EASF) to provide explicit subsidy support, preferably from the general exchequer, and supplemented by a sector- specific cess of five per cent of the air fare along with proceeds from the privatisation of airports. The committee has said that the EASF should be established outside the Consolidated Fund of India and its management vested with an independent trust. ``The Government should fully harness the scope for recovering the cost of EAS operations, as far as possible, through direct user charges,'' the committee has said.

The committee has also made a number of recommendations to make air transport more affordable. In this regard, it has asked the Government to replace the Inland Air Travel Tax and Passenger Service Fee with a single lower ad valorem sector-specific cess at five per cent of the airfare which could put in the proposed EASF.

Further, it has also recommended an end to the existing discrimination based on the type of aircraft and to bring about parity in taxes on aviation turbine fuel (ATF) for jets and turbo-prop aircraft with a maximum certified seating capacity of less than 80.

Regional air services, the committee has said, should be encouraged by reducing route navigation and landing charges for aircraft and helicopters having a maximum certified capacity of less than 80 seats. The Government, it said, should substantially lower the excise duty and sales tax on ATF and abolish the import duty and sales tax on Avgas. Besides, the committee has also said that airlines should be allowed to source ATF from the supplier of their choice.

The committee has also urged the Government to pursue liberalisation of international air transport in two phases. While in the first phase, private airlines based in the country should be allowed to provide international air transport services to and from India, in the second phase, the Government should seek more liberal arrangements under the bilaterals and enhance full access to wider market segments by joining a regional or plurilateral group of countries with a similar agenda of liberalisation.

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