27/08/2019 - Indian Polity | Mainstorming

IAS Parliament 5 years

KEY POINTS

The cooperation of States is seen as a major factor in the growth of the civil aviation sector. The Regional Connectivity Scheme, UdeDeshkaAamNaagrik (UDAN), has become a game changer as this flagship programme has a built-in mechanism to develop stakes of State governments in the growth of the sector.

Cooperative federalism and avian sector

· The policies of States and Centre are now being interlinked to make flying accessible and affordable.

· For any airline in India, the cost of Aviation Turbine Fuel (ATF) forms about 40% of the total operational cost.

· States have very high rates of value-added tax (VAT) on ATF — sometimes as high as 25% which has dampened the growth trajectory of civil aviation.

· Therefore, relief on ATF is a major incentive for airlines to augment their operations. For States, it would be a notional revenue loss which can be offset by enhanced economic activities as a result of increased air connectivity to the region.

Airport development

· The development and management of airports. India had about 70 airports since Independence until recently. Under UDAN, the Union government, with the help of the States, has operationalised 24 unserved airports over the past two years;

· 100 more are to be developed in the next five years, which can only be achieved through the active collaboration between willing States and the Centre.

Linking the hinterland

· States and the Central government can play a crucial role in supporting airlines to develop air services in the remote regions.

· To reduce operational cost of airlines and airport operators, incentives from State governments have been sought: some in the form of financial support such as VAT reduction.

· Sharing of viability gap funding with airlines, and non-financial incentives such as providing security and fire services free of cost to airport operators.

· For this States need to create a conducive business environment to facilitate the strong aspirations of a burgeoning Indian middle class to fly at least once a year. It would boost ticket sales from the present level of eight crore domestic tickets.

· Developing airports, incentivising airlines and pooling resources of both the Union and State governments can accelerate the harmonised growth of the Indian civil aviation sector which would be equitable and inclusive.