The Hindu : Clearing the clouds

Online edition of India's National Newspaper
Thursday, Dec 11, 2003

Opinion

Opinion - Editorials

Clearing the clouds

THE NARESH CHANDRA committee's report has made a clear pitch for far-reaching reforms in the aviation sector and suggested disinvestment in the national carriers — Air India and Indian Airlines. Though the report, submitted to the Civil Aviation Minister Rajiv Pratap Rudy, was just the first part of its submissions to the Government, the panel has made a complete and comprehensive sweep of the aviation scenario in the country that is bound to stir up a hornets' nest. Considering that Mr. Rudy kept harping on the importance of this panel's report in the shaping of a new aviation policy, the Naresh Chandra committee must have significant backing from the Ministry too, at least at the political level. Though much of what the committee has said may not be new, in terms of policy, it has gone beyond the earlier parameters and made a virtue of the privatisation policy that has had an on-off response from successive governments at the Centre.

The report has taken a look both at airlines and airports to provide an overall thrust to the tourism and aviation sectors. With regard to the privatisation of the Delhi and Mumbai airports, which the committee wants speeded up, there should be no major problems. The Government has already taken a decision on this and needs only to push ahead with the process. But it is the privatisation, or disinvestment, of the airlines that could become an issue once again. Only last year, the Government announced the shelving of the disinvestment proposals for both Air India and Indian Airlines, for diverse reasons. Basically, it could not get the right kind of bidders to become strategic partners. Now, the panel would like the limit for foreign equity investment in the domestic and international services raised from 40 to 49 per cent, with a 100 per cent foreign investment dispensation in helicopter services. This may look good on paper, but it is the process of tendering and the conditions attached to the management of the airline by the strategic partner that will decide whether a fresh attempt at privatisation can succeed. A related problem will be on the plan of the two airlines to purchase new aircraft. If the privatisation scheme is approved, the acquisition may have to be deferred so that the private partner or consortium also has a say in the choice of aircraft.

There has to be a more cautious approach to the proposal for "low cost no frills" airlines, because there can be no compromise on maintenance and security procedures. An interesting aspect of the committee's recommendations pertains to duty and tax structure in the aviation sector. The committee has suggested a flat rate as airport tax, comparable to the Southeast Asian countries, as there has been a tendency to increase the airport tax at will and State Governments have planned to slap a much higher levy on passengers to raise resources for the construction of a new, greenfield airports — as, for instance, in Hyderabad and Bangalore. It will be interesting to see how the Centre reacts to this suggestion. Similarly, when it comes to Air Turbine Fuel (ATF), the Sales Tax differs widely from State to State, causing serious problems to the airlines. It may be time to levy a uniform rate of tax on ATF. If the Naresh Chandra committee's recommendations are to be implemented in any meaningful way to provide a thrust to the Aviation and Tourism sectors, the Centre may have to build a political consensus and take the trade unions on board.

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