NEW DELHI – India hopes to unveil a new civil aviation policy next month, as part of its plans to boost regional air connectivity and reopen closed airports to enhance passenger growth.
The draft proposes airport upgrades; better local connectivity; easing of norms for overseas flying; further liberalization; development of the cargo business; attracting investments in the maintenance sector; ground handling; and security.
To help airlines keep costs down, New Delhi has offered a tax exemption on the customs duty for jet fuel, and a waiver of the service tax on maintenance, repair and overhaul expenses. But the draft policy includes a new, 2% tax on some air travel between bigger cities, effective Jan. 1, 2017. Revenue from the proposed tax would be used to reopen more than 300 closed Indian airstrips and airports, and to trim flying expenses by capping airfares between small towns.
The government’s plan is to bring no-frills airports to smaller cities and to revive unused airports. The government would pay for upgrading the airports.
The draft proposal also suggests allowing foreign investors to increase their stakes in domestic airlines from the current 49% to more than half.
The main bone of contention in finalizing the aviation policy is the so-called “5/20 rule.” Under the rule, carriers with five years of flying experience and a fleet of at least 20 aircraft would be permitted to fly overseas.
While legacy carriers have opposed any changes to the rule, startup airlines are against continuing with the requirement.