The Way Forward

After long, we are talking about regional and remote air connectivity, realising how intrinsic it is to economic development. It is better late than never. In fact, it was in the beginning of 1990s that the whole idea of regional and remote connectivity was conceived after private players were allowed to start scheduled airlines. But then market dynamics prevailed and civil aviation authorities soon realised that the private operators were only focusing on metro routes, as these were the only market-friendly and profitable ones at that time.

That pan-India air connectivity has very high multiplier effects on the local economy of the vastly different regions across India is understood by all the stakeholders. As regards the government, it is a constitutional obligation, to facilitate pan-India air connectivity. It is only now that the government is giving it the needed thrust to begin with by drafting a new Civil Aviation Policy. The Ministry of Civil Aviation (MoCA) in the draft policy has quoted a report of the International Civil Aviation Organisation (ICAO) which states that “every rupee spent on air transport and every single job created in aviation has multiplier effect on the economy and employment by 3.25 and 6.10 times respectively”.

Therefore, the government’s Route Dispersal Guidelines (RDGs), issued in 1994 was a well-intended directive aimed at ensuring inclusive economic growth of the nation through better regional/remote air-connectivity. These RDGs mandated 10 per cent of ASKMs (Available Seats Kilometres) flown on Cat I Routes (mostly between all metros) to be deployed on Cat II Routes (comprising North East region, Jammu and Kashmir, Andaman Nicobar and Lakshadweep). Further, one per cent of ASKMs on Cat I were to be additionally deployed on Cat IIA Routes (intra Cat II destinations) and 50 per cent of ASKMs of Cat I Routes on Cat III (all other destinations across India). Surprisingly, this RDGs Directive of 1994 remained a sacrosanct document for the next two decades.

It is only in November 2014 that the MoCA initiated the proposal to revise these guidelines when actual deployed capacity on Cat II routes had more than doubled the mandated figure of 10 per cent of deployed capacity on Cat I Routes. The deployed ASKMs on Cat II Routes too have grown to around 1.5 times the mandated figure of one per cent in the 1994 directive.

GOVERNMENT’S INITIATIVE

The revised RDGs, prepared last month by MoCA as part of the Draft National Aviation Policy, propose to increase the number of Cat I Routes, from earlier 12 to 26, adding more routes connecting the metros to some state capitals where passenger traffic had crossed 5,00,000 per annum during the year 2013. It has also proposed to add airports in Uttarakhand and Himachal Pradesh to existing Cat II list. The revised document was discussed by MoCA with all the stakeholders, twice during January 2015. While the need for inclusive economic growth, through air-connectivity across the country, should never be lost sight of, it would be absolutely necessary to ensure long-term commercial viability of the airlines while ensuring that remote/regional routes are connected through a very balanced and proactive approach. Such an approach would essentially be a collaborative one requiring equal participation of both, the airlines and the government, including state governments.

The government should ensure that it provides incentives and brings in the necessary regulatory changes to facilitate deployment of small aircraft on remote/regional routes which pose stiff challenges in terms of passenger load factor and aviation infrastructure. The affordability of ticket price would remain a key factor to ensure commercial sustainability of these routes. The very fact that actual deployment on Cat II Routes more than doubled the RDGs, while Cat IIA Routes grew 1.5 times—clearly indicates that government’s incentives would have to be more focused on Cat IIA type routes.

PROPPING SCHEDULED COMMUTER AIRLINES

In August last year, the Ministry had proposed a list of 87 remote/regional airports all over India to be incentive destinations. All these destinations have constraints of infrastructure and unstable demand, necessitating deployment of small-sized aeroplanes and helicopters. The government plans to categorise as ‘Scheduled Commuter Airlines’ (SCA)—small aircraft operators flying at least four times in a week to any of these incentive destinations. The SCAs will have the onerous task of developing these remote routes by proactively monitoring a well-designed long-term business plan. The gestation period in aviation industry is invariably long and those without a 10 to 20 years business development plan would always struggle to sustain viable operations.

THE WAY FORWARD

The government should consider doing away with the RDGs mandated deployment of one per cent on Cat IIA Routes as these would be serviced only by small aircraft. It should rather give direct incentives to SCA in terms of capital side subsidies – cheaper capital/lower interest rates for loans taken to purchase aircraft. In its draft discussion paper on Remote/Regional Area Air Connectivity of August 2014, the Ministry had proposed to establish an Air Connectivity Fund (ACF), as a long-term measure to provide necessary financial support to promote air connectivity to remote/regional areas. This ACF should primarily be used to offer soft loans to SCA operators and develop aviation infrastructure at incentive destinations.

All the state governments are important stakeholders in improving air connectivity in their respective strategic/remote areas and will also have to play active role in facilitating SCA operations by appointing a ‘nodal officer’ at each destination airport. The state governments should incentivise SCAs by providing complimentary ground handling services and waiving off all applicable local taxes. The remotest destinations will require greater support of the state government in terms of underwriting of seats with a fasttracked and transparent reimbursement mechanism. The states should also develop matching rail/road connectivity from incentive destination airport to the nearest city. Like the SCA operators, state governments would have to come forward with 10 to 20 years prospective plan and, while closely monitoring the development of these routes, take a total review the proposed incentives not before a period of five years.

COLLABORATIVE APROACH

In conclusion, it would be important to reemphasise the importance of providing remote/regional air connectivity to fast-track India’s economic growth. Sustainability of such a connectivity is only possible when the government and the industry work as partners to embark on a collaborative approach. Establishing the ACF, bringing about regulatory changes and providing infrastructural support would be key factors in ensuring an economically developed India has compatible and enabling air connectivity.