Government Envisages Investment of US $ 12.1 Billion in the Airport Sector

Civil Aviation Minister, Shri Ajit Singh, while launching the India Aviation 2014 today in New Delhi, said that rapidly expanding air transport network and opening up of the infrastructure to private sector participation have fuelled the growth of air traffic in India.  He further said that the Government has envisaged an investment of US $ 12.1 billion in the airport sector during the 12th Plan period.  The text of his address is as follows: 

Civil Aviation is a key infrastructure sector that facilitates the growth of business, seamless flow of investment, trade and tourism, with significant multiplier effects across the economy. The aviation sector is one of the prime movers for economic growth and a strategic element of employment generation, besides providing air transport for passengers and goods. Over a third of world trade by value is delivered by air and about half of international tourism is facilitated by air links. Aviation has created a global community based on the connectivity it provides. In a world of decreasing barriers to trade, the civil aviation industry remains a unique engine for innovation and technological progress, one that provides infrastructure that keeps the nation competitive.

Rapidly expanding air transport network and opening up of the airport infrastructure to private sector participation have fuelled the growth of the air traffic in India. The Indian airport system is poised to handle 336 million domestic and 85 million international passengers by 2020, making India the third largest aviation market.

In order to stimulate air connectivity, airlines are expected to add around 370 aircrafts, worth US$ 27.5 billion, to their fleet by the year 2017. Moreover, it is estimated that commercial fleet size is expected to reach 1000 from 400 today by 2020, and one thousand General aviation aircrafts by 2020 including fleet renewal. Estimated investment requirement for the General aviation aircrafts alone is of the order of US$ 4 Billion.

Indian government has envisaged investment of US $12.1 billion in the airports sector during the 12th Plan period, of which US $ 9.3 billion is expected to come from the private sector for construction of new airports, expansion, modernization of existing airports and development of low cost airports to keep the tariff at its minimal at smaller airports, improvement in connecting infrastructure, development of world class Air Navigation Services infrastructure. At the same time, in order to develop world class ground handling, cargo, logistic facilities including high-output distribution centers at major airports, huge investment is also anticipated.

Indian Government is committed for the development of the sector and has introduced several policies and regulatory reforms to encourage private participation and investments in the sector. There have also been several initiatives in the regulatory framework for propelling the aviation sector to new heights despite the challenges faced due to rising fuel costs, fierce competition and infrastructure bottlenecks. Recently, we have allowed 49% FDI by the foreign carriers in domestic airlines which are going to provide much-needed relief to the domestic aviation industry, reeling under the pressure of mounting losses and rising debt burden. Some carriers like Tata Air Asia and Jet Airways  Etihad have already announced their collaboration which is expected to boost civil aviation both domestically and internationally. Further, Indian carriers have been allowed to import ATF directly.

Recently, the Aircraft Acquisition Committee has been abolished to liberalise the acquisition of aircraft by the scheduled, non-scheduled airlines, flying institutes and for private use, which will give impetus to the growth and expansion of airlines in India. Henceforth, no permission for acquisition of aircraft will be required from the Ministry of Civil Aviation and they will be free to acquire aircrafts as per their business plan and requirements. This decision will minimize delays in seeking approvals and avoid the cumbersome procedures which airlines were supposed to follow before acquiring an aircraft. The decision will help airlines to plan better for future induction of aircraft and also maintain timeliness of acquisition.

The Government has also allowed Flexi Use of Airspace by civil and military users, which permits them to efficiently and effectively utilize the available airspace on sharing basis. It would result in optimum usage of airspace, enhancement of airspace capacity, minimizing delays, conservation of fuel, reduction in emissions and ultimate benefits to travelling public. It is expected that there will be a reduction of carbon emissions by about 7 million kg per annum by direct routing between 7 major city pairs only because of flexible usage of airspace.

In an endeavor to make the growth of the sector equitable and inclusive, Government has taken significant measures for providing affordable air connectivity to remote and interior areas of the country – the North Eastern Region and Tier-II & III cities of India. Government is in the process of formulation of a policy for the promotion of regional connectivity, incentivizing Indian airlines to operate on these routes, by code-sharing and seat-credit mechanism. The bigger airlines will be able to use such credits to meet their requirement of having to connect such remote areas without having to lose money on such operations. This is expected to generate greater financial viability for regional operators. An Essential Air Services Fund is also being proposed by the Government for providing subsidy for development of low-cost airports throughout the country. This is to encourage domestic airlines to fly on remote interior routes with tourism potential.

To facilitate the growth of MRO Business and to make it competitive, the Government has announced several concessions in the Union Budget for 2013-14 including extension of time period allowed for utilisation of aircraft parts and equipments from three months to one year, exemption of custom duty on parts, equipments, accessories, spares required for MRO purposes to private category aircrafts also and inclusion of foreign airlines for the purpose of duty-free imports of parts, etc as applicable for scheduled air transport services. These concessions have been widely welcomed by the industry.

To spur the growth of international air travel, the Government has taken substantial steps to liberalize and grant traffic rights to Indian carriers to fly to several new destinations across the globe. The new traffic rights have increased the overall traffic entitlements of the airlines by approximately 60% over the existing traffic rights.

Another important move that has accelerated the modernization and development process is the privatization of five major airports under PPP mode and the policy of development of Greenfield airports which envisages synergy between the public and private sector.

Moreover, to develop civil aviation in India and further facilitate the functioning of the sector, series of policy reform decisions are under consideration. These include getting ATF declared as notified product & bringing transparency in its pricing; rationalisation of bilateral air service agreements with different countries, traffic entitlements on international routes to Indian carriers, creation of a separate Air Navigation Services  Corporation from AAI to make it more effective, efficient & professional body, creation of a Civil Aviation Authority in place of DGCA and creation of a separate Civil Aviation Security Force which is professionally trained for the work of civil aviation.

Considering the growth prospects of air traffic, potential for large scale acquisition of aircrafts by the carriers, and substantial investment projections, Indian aerospace market offers tremendous long term opportunities for providing maintenance repair & overhaul services, ground handling services, manpower training, building an efficient airspace & air traffic management system, air cargo services, establishing aircraft designing & manufacturing centres, etc. Furthermore, currently, the air travel penetration in India is 0.04 air trips per capita per annum which is far behind developed countries like US & Australia (more than 2 air trips per capita per annum), and China & Brazil (0.3 air trips per capita per annum).  The gap between potential and current air travel penetration highlights the huge potential for the air traffic growth in India, considering a relatively higher trajectory of economic growth coupled with necessary Government support.

Let me conclude by saying that our aviation scenario is fast changing and poised for breaking boundaries and scaling new heights. With ever-increasing scope for participation by private sector, we expect significant developments in the years ahead. I invite you all to participate in India Aviation 2014 at Hyderabad and contribute in the enhancement of air connectivity in the region.


Tags: $12.1 billionAircraftAirlineAviationCivil AviationGovernmentIndiaNew Delhi

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