Financial Daily from THE HINDU group of publications
Monday, Feb 23, 2004

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Opinion - Editorial

Fulfilling the agenda

THE DECKS ARE expected to be cleared today for private airlines to fly to Colombo, ending the monopoly of the government-owned airlines on overseas routes. Reform and liberalisation of the civil aviation sector will have inched forward. Exactly ten years ago the Air Corporation Act of 1953 was repealed to end the domestic monopoly of the government-run airlines. Since then private airlines have not just taken root but matured to grab over half the domestic passenger market. A natural extension of that policy would have been to let them fly overseas. But few countries have done so unreservedly, and vested interests here were able to maintain enough pressure on the government to ensure that full freedom was not granted. The Prime Minister, Mr Atal Bihari Vajpayee, who has striven for liberalisation, would not have experienced as much interference had he been driving dodgem cars on the fair ground.

Indeed, it took a dramatic announcement by him at the summit of the Association of South East Asian Nations last October to scatter the stonewallers within his Government and outside. Without any debate within, let alone approval of, his Cabinet, Mr Vajpayee promised an Open Skies Policy for airlines from the Asean and reciprocal rights for private airlines from India. His Cabinet cleared private airline flights to Colombo in December, but detractors dug in thereafter and the other proposals remained unapproved at the last Cabinet meeting on February 6 and will await the pleasure of the next government.

Yet, it would be wrong to conclude that reform has always been slow in coming. At times, it has come in a rush. When the Naresh Chandra Committee submitted its roadmap for the civil aviation sector last December, few had bargained for the recommendations being implemented right away. The Government surprised everyone by going even beyond what the Committee sought. It abolished the Inland Air Travel Tax, cut the excise duty on aviation fuel, exempted small passenger aircraft from paying landing charges and reduced those for large aircraft. Together they made such a huge dollop of reform that fares were lowered promptly; apex fares on some routes dropping to levels not seen the past ten years. What the Government did was only rational: The inland air travel tax, imposed in 1990 after a runaway increase in petroleum prices, had not been given up because it brought in about Rs 1,000 crore a year. Airport charges were exorbitant.The Airport Authority of India has improved its performance and profits every year, even as airlines rode the roller coaster. The reduction in charges should level the terms somewhat.

The value of reform in the aviation sector is in part reflected in what it can do for tourism. Just one example illustrates it amply. Airports in Kerala, notably Kochi, recently allowed to host more direct flights from overseas, recorded more than 40 per cent growth in traffic this fiscal. Earnings from tourism, whose fortunes are directly linked to the number of seats that airlines offer, will grow from Rs 950 crore to Rs 1,200 crore this year. The Open Skies Policy has proved its worth.

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