Of late, the Ministry of Civil Aviation has been in a seemingly caring mood. First, it requested banks to lend ₹600 crore to cash-strapped SpiceJet. Now, it has proposed a floor and cap on the fares charged by airlines. The minimum price is to prevent airlines from booking tickets below their cost and presumably running themselves into financial ruin (à la SpiceJet). The maximum price — ₹20,000 a ticket on economy class — is to prevent passengers from being exploited. The sudden surge in fares, when SpiceJet temporarily suspended operations, was the trigger for this. In playing the regulator, protection for everyone seems the motto.

But there is a very thin line between a professed commitment to customer welfare and unwanted interference. The Civil Aviation Ministry should learn from history and stop meddling with the cycle of creative destruction and with the forces of a free market. It may be recalled that no good came out of banks being forced to convert a chunk of their loans to the now defunct Kingfisher Airlines into equity, and that too at a stiff premium on the market price. It is by no means certain at this juncture that SpiceJet will go the Kingfisher way; it may well earn a fresh lease of life if the funding that it is trying to cobble together materialises. But the Centre should not be playing knight in shining armour, particularly at a time when public sector banks have enough bad debt on their hands. If SpiceJet goes belly up, the market will find a way of restoring equilibrium, which could happen sooner rather than later with other airlines set to take to the Indian skies.

The same argument holds good when it comes to regulating airfares. Although the Director General of Civil Aviation is empowered under the Aircraft Rules, 1937, to intervene if operators establish excessive or predatory tariffs or indulge in oligopolistic practices, there is hardly any evidence of cartelisation in the Indian aviation market. Temporary last-minute price distortions, which occurred for instance when SpiceJet suspended operations, are just that — temporary. Market distortions run the risk of denting investor interest in the aviation market and less competition eventually means less choice for the customer. The previous government, too, in a fit of righteous populism against sudden fare spikes, forced airlines to notify various price bands of their fares on a monthly basis. Mercifully, it stopped at this and didn’t propose price floors and caps as this government has done. To invigorate the airline industry, the Centre should look at moderating the exceptionally high taxes on aviation turbine fuel; it should also lower airport charges where it can. Finally, it must start thinking about taking Air India off life support — if anything, this is the mother of all the market distortions in the civil aviation space.

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