To usher in further reforms in the civil aviation sector, the government is believed to have approved the Protection and Enforcement of Interests in Aircraft Objects Bill, 2024, sources told businessline.
Accordingly, the Bill will lower the leasing and financing costs of aircraft for Indian carriers, thereby also reducing airfares. At present, the majority of commercial aircraft in India are leased.
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The Bill, sources said was approved by the Cabinet on Thursday. It will now be presented before Parliament. If passed, the resulting Protection and Enforcement of Interests in Aircraft Objects Act, 2024 will guarantee lessors rights to repossess their leased equipment.
In the process, the Act will ratify the Cape Town Convention, which is a global treaty that guarantees lessors’ rights to repossess their leased high-value equipment, such as aircraft, helicopters, and engines, in case of payment defaults.
The legal instrument was adopted at a diplomatic conference held in Cape Town in November 2001 under the auspices of the International Civil Aviation Organisation (ICAO) and the International Institute for the Unification of Private Law (UNIDROIT).
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Notably, India is a signatory to the convention, but Parliament has not ratified it. This unique situation has given precedence to local courts’ judgments over the norms of the convention.
Consequently, an inter-ministerial consultation process was kicked off last year to revise the Bill, which was tabled in the Parliament in 2018.
The reworked Bill comes in the wake of the Go First crisis, which concerned global lessors about leasing aircraft to India-based airlines. The country is increasingly being deemed a ’risky jurisdiction’.
The Bill said sources, would accord primacy to the provisions of the convention in case of a conflict with any other law.
It will empower the Centre to make necessary rules for implementing the convention and protocol in India. This is also expected to boost lessors’ confidence in the Indian civil aviation space and reduce lending costs, thereby positively impacting airfares.
The industry has welcomed the development.
“With over 2,700 new airplanes anticipated in India over the next 20 years, the rapidly growing aviation sector requires a robust infrastructure, supportive policies, and strong financing mechanisms. Recognizing the Cape Town Convention under Indian law is vital for the smooth movement of aircraft assets in this fast-growing market. The absence of ratification poses risks for creditors, increasing leasing rates for airlines,” Salil Gupte, President, Boeing India and South Asia told businessline.