NEW DELHI: The Government has tightened the norms for airline operations in the country by increasing the subscribed equity capital needed for starting a scheduled airline with five large aircraft from Rs.30 crore to Rs.50 crore. The decision to raise the bar in the fast expanding aviation sector is aimed at encouraging serious players only.

The new norms will be applicable with retrospective effect for those having aircraft weighing 40,000 kg each. Existing airlines would, however, get a year to comply. The Government has stipulated that such airlines will have to pump an additional Rs. 20 crore into the subscribed equity capital for every five additional aircraft they induct. It would mean that the State-owned Indian Airlines that has a fleet of 74 aircraft and a subscribed equity of Rs.107 crore would have to bring in more than Rs.200 crore to meet the new, stricter norms. However, it would not affect private airlines like Kingfisher that has a subscribed equity of Rs. 372 crore and a fleet of 23 aircraft and the low-cost airline SpiceJet which has a current subscribed equity base of Rs. 185 crore and a fleet of 10 Boeing 737s. Most other airlines would need to expand their equity base.

Official sources said the new rules would be notified soon for implementation. The rules have also been revised for smaller aircraft. Consequently, the subscribed equity capital for an airline with a fleet of five aircraft weighing less than 40,000 kg each has been doubled to Rs. 20 crore. Such airlines would be required to bring in Rs. 10 crore into their equity capital for every five aircraft inducted. While the larger aircraft like the Boeing 737and Airbus A-320 aircraft have a weight of more than 40,000 kg, smaller aircraft like Dornier and ATR have a weight of less than 40,000 kg.

With the boom in the aviation sector over the past three or four years, a good number of applicants had lined up for the Government permission for starting a scheduled airline.

As stricter norms come into force for the capital-intensive industry, sources said that it would dissuade non-serious players from entering the domestic skies. The rules have remained unchanged for the past decade or so. The stipulation of having a subscribed equity capital of not less than Rs. 30 and Rs. 10 crore was implemented on March 1, 1994, sources said.

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