Revival of 350 unused airports will give a five-fold rise to Indian Aviation industry over the next few years, said RN Choubey, Secretary, Ministry of Civil Aviation (MoCA)
By Sai Nikesh D
Intended to take the Aviation industry to greater heights, the Ministry of Civil Aviation, Government of India, in coordination with Federation of Indian Chambers of Commerce and Industry (FICCI), is hosting the 5th International Exhibition & Conference on Civil Aviation- ‘India Aviation 2016’, being held in Hyderabad between March 16-20, 2016.
The second day of the event on Thursday witnessed an international conference, which had stalwarts from government, industry and academia.
The event inaugurated by Civil Aviation Minister Ashok Gajapathi Raju and attended by industry experts, covered issues like Enhancing Air Connectivity, Manufacturing & Maintenance, Repair and Overhaul(MRO) operations, Financing Air Transport: Challenges & Opportunities, Skill Development: Filling the gap, related to the Indian aviation industry.
Enhancing Air Connectivity
Speaking on the need to enhance air connectivity, R N Choubey, Secretary, MoCA, said, “Regional connectivity is an expensive affair and an entry barrier that is obstructing real happening of regional flying in the country to the expected extent.”
“While there are currently 75 airports connected under scheduled operations, there are 350 flying strips (built during World War-II) lying unused. Revival of these unused airports will give rise to number of scheduled airports in the country, thus ensuring a five-fold rise for the industry from the current level of 20%, over the next few years,” Chaubey said.
In this regard, the government is also keen to ensure fiscal concessions to the stranded airports, which include nil service tax, bringing down ticket expenses, exemption of landing and parking charges, among others.
Government will provide viability gap funding for airports, in case, the concessions turn concerns for them, he added. He further informed that the new Draft Aviation Policy allows code sharing between regional and global airports towards ensuring better connectivity.
Henry Steingass, Regional Director, South & Southeast Asia, United States Trade & Development Agency(USTDA) lauded India for its measures towards improving global connectivity and said Aviation will form a key part in the country’s ‘Smart Cities’ mission.
Aviation Corporate Policy is expected to help Indian industry on a larger scale, however, technical expertise is the need of the hour for the Indian Aviation industry. Stating that there are around 30 US firms ready to provide pilot projects, technical expertise and other support to India with respect to aviation industry, Steingass informed that the US is looking forward to the 5th India-US Aviation Summit which is going to be held in November.
Indana Prabhakar Rao, CEO, Delhi International Airport, said that policy, aircraft, infrastructure and skilled manpower form the four pillars of the Aviation industry.
Lauding the government’s move to ensure viability gap funding for airports, he also stressed the need to develop long-haul flights and hub airports in India so as to avoid passenger feeding to other global airports.This is one of the key points that India has to focus in order to witness an increased passenger traffic.
Jayant Nandkarni, President, Business Aircraft Operators Association (BAOA), while welcoming the government’s move to open 110 disbursed/unused airports in its Budget 2016, also emphasised the need to address issues that were raising concerns to Business Airlines (BA).
Stating that while 70% of business airlines are operational in Delhi and Mumbai, he raised concern that delays in operationalizing second airports (in Delhi and Mumbai) are causing great harm to the industry.
He suggested ‘setting up of satellite General Airlines/ BA/Scheduled Commuter Airlines (SCAs) airport fields outside Delhi and Mumbai’ as a solution to that problem.
Business aviation and Scheduled Commuter aviation though in their infant stages are functioning well. While the BAs have huge growth potential, SCAs will be the ‘future for masses’, he added.
Rollback of customs duty imposed in 2007-08 on BAs, spurring of operations, allowance of more BA flights to hinterland and removal of perception over BAs as ‘luxury’, can help the country’s business aviation activity.
Manufacturing & MRO
Pratyush Kumar, Chairman, Boeing India, while affirming the positive trends of Make in India, stated that government should not lose sight of the fact that the existing excess number of MRO’s need to be worked on rather than going for new ones.
“Manufacturing activity has increased as a result of ‘Make in India’ and so has operations. However, procurement of aerospace-grade material remains a challenge for the Indian Aviation industry, which is pulling the industry towards imports,” he said.
Meanwhile, Ashish Saref, Vice-President-Industry Development, Airbus Group, India urged on the need to reduce import dependence and promote start-ups in the industry. He suggested that the Indian Aviation industry should have a special ‘program’ in line with the West, in order to witness real progress.
Responding to a query on the ‘decline in aircraft component exports in 2014-15’, he said, “High-tech exports, especially aircraft components, need a lot of support by way of investments. Its time-consuming, however, Indian aircraft component exports will witness a jump over the next 3-5 years.”
Palash, Roy Chowdhury, MD, Pratt & Whitney Commercial Engines and Global Services, pitched the need for ‘R&D boost in the Indian Aviation industry with key participation from private players on par with PSUs and inorganic acquisition of technology by inviting global Original Equipment Manufacturer (OEMs) to set up MRO operations in India.’
He also stressed the need for an increase in FDI to above 50% if the country is looking at increased foreign involvement in terms of technical expertise and other support.
Referring to the growth of aviation industry in countries like Japan, UAE, etc, Arjit Ghosh, President-India, Honey Well Aerospace, said, “It would take around 5-10 years to achieve a good level in the design & development phase, another 10-15 years to realise actual manufacturing activity and 20-40 years to realise full potential in MRO operations, in the Indian Aviation industry and on the whole to remain self-dependent.”
Meanwhile, Kalpana Awasthi, Joint Secretary, Department of Industrial Policy and Promotion (DIPP), informed the action plans taken by the MoCA under ‘Make in India’, which included ensuring tax-free bonds for facilitation of funds to airline operators, exemption from service tax of 12.36% and airport royalties, providing infrastructure for retaining MROs working with India to ensure a strong MRO base.
Financing Air Transport- Challenges & Opportunities:
Panelists covering this vertical urged the need to develop a cargo hub in India to ensure better financial results for the Indian Aviation industry.
Referring to government reports, Mahesh Agarwal, MD, Gati Limited, said, “While a growth rate of 3.4% (from 0.68 MMT to 2.53 MMT) has been achieved by India in handling air cargo over the last 2 years, it is expected to grow at a rate of 4.7% per year over the next 20 years.”
Speaking on core financial issues related to the industry, Pawan Kumar Agarwal, President-Corporate Finance, YES Bank, said “High-level financing and long-term execution periods remain challenges for the Aviation industry in gaining financial support from banks.”
Low operating margins, poor financial track record, lack of dedicated policy and regulatory framework, business uncertainty, commercial viability, lack of dedicated financial institutions, are among other challenges, that are obstructing the Indian Aviation industry from gaining the much needed financial support from banks.
In this regard, recommendations have been provided to the government to accord infrastructure status to all segments related to the aviation industry, to allow investments by foreign wealth funds similar to the way seen in countries such as China, Singapore & UAE and to introduce Credit Enhancement Schemes in order to make the industry viable for financial support, Pawan Kumar added.
Sidharath Kapur, President & CFO, GMR Airports, said the passenger movement at domestic airports is expected to witness a three-fold growth by 2020-21 and a seven-fold growth by 2030-31.
However, the percentage share of passenger traffic at metro airports is likely to come down in future.
“An investment of $40 billion over the next 10 years, a business model encouraging private capital and plans for financing infrastructure, are among others things that are needs of the hour for Indian Aviation industry,” he said.
“Make in India is doing good. But what is noteworthy here is that despite the initiative helping the industry, it is the industry that is helping the initiative,” Sidharth remarked.
Responding to a query whether ‘foreign players setting up their units in India’ will pose a serious challenge to domestic players, he said, “If the domestic players really want to grow and give a strong competition, then they will have to be ready to face the challenge.”
Skill Development Filling Gap
Experts conveying their thoughts on skill development reflected the need to enhance R&D activities in the industry. With the right mixture of government-industry- academia in place, they urged that academic courses should be in line with the industry needs so as to witness an inclusive development.
This was published in The Dollar Business on March 17, 2016