Daily Answer Writing
17 July 2021

Q) Enumerate the list of problems faced by the Airport sector today in India. Analyse the role of regional connectivity scheme(RCS) in this regard.  (250 words)

Source: <https://pib.gov.in/PressReleasePage.aspx?PRID=1736211>

GS 3: Transport

Approach Answer:

Introduction: The aviation sector in India has a huge potential. Currently, only about 2% population travels by air annually. There are about 440 aircrafts functioning in India compared to 2400 in China. Even Singapore has 200 jets. However, there have been a series of problems that has kept the sector from expanding.

 

Problems faced by Airports sector today

              (i) Demand and supply mismatch: sometimes low fare flights have higher price than full service(or business class), yet India is one of the cheapest fly destinations: this means loss to companies.

              (ii) Ease of Doing business: Today-30days for basic formalities, 13 procedures. Acc. To Air operator certification manual(DGCA), applicant may receive AOP in 3months. Sales tax on ATF 24% in various states.

              (iii) Flying abroad: 5/20 rule- Carrier can start flying abroad only if it has 20 aircrafts and 5 years’ service experience. Govt. introduced a policy for regional airlines in 2007 which allowed anyone with one aircraft with a condition to acquire at least two more aircrafts within two years-permitted to start scheduled service between two small cities, which wasn't able to attract investors.

              (iv) Regional connectivity: There are 476 airstrip in the country but till now, air travel possible on 90 only.

              (v) Lack of Infrastructure: Hangers, Maintenance repair and overhaul(MRO) infrastructure etc.

              (vi) COVID -19 Crisis: This has led to an acute shortfall in the number of fliers in the world. The loss due to this has forced airlines to cut short or shut down the business. For example Jet Airways has filed for insolvency recently.

              (vii) Profitability issue: Airlines like Indian Airlines have faced profitability issue for a long time.

             

The Regional connectivity scheme is a market-based policy intervention that builds provides a 3 year subsidy to fund the losses to cap airfares at ? 2,500/hour on at least half the seats of a flight running on subsidized routs to the operators Applicable to 200-800km flight. It is based on viability gap funding model in which 80% of the subsidy is provided by the central government by charging a levy of up to ?8,500/ticket on flights deployed on the national route and the remaining 20% by the state governments.

 

Role of RCS in removal of these obstacles:

Boosts civil aviation sector: The incentives also helps private sector from recovering from economic stress.

Infrastructure development by reviving of un-served or under-served airstrips.

Connectivity in remote areas enhanced: Especially in N-E region where, both road and rail routes are tiresome due to lack of adequate infrastructure.

Development of allied sectors: As the routes become more prevalent the MRO sectors etc. would also develop

It makes flying affordable for the masses: leading to future expansion of the sector.

Promotes tourism,

Increase employment and promote balanced regional growth.

 

Limitation of the scheme:

Slow implementation: Only few routes in N-E are currently operational.

Fuel cost is still high which impacts long term profitability.

Development of allied sectors like MRO would need infrastructure development firstly.

Increased cost of other routes due to excess cess.

             

Conclusion: The RCS scheme when combined with other initiatives such as removal of 5/20 rule, privatization of the operations of the aviation sector using hybrid till model, and 49% FDI under automatic route have given hope to India's aviation sector. However more incentives might be required to be given on the trunk routes in India in order to save airlines from the temporary crisis shown by COVID-19

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