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Not palatable fare anymore

The government’s response to exorbitant pricing of last-minute tickets by airlines has been to set up a committee within the aviation ministry to monitor fares.

india Updated: May 21, 2011 17:05 IST

The government’s response to exorbitant pricing of last-minute tickets by airlines has been to set up a committee within the aviation ministry to monitor fares. This is at best an ad hoc measure. It is not our case that air fares should be controlled in India, but some agency needs to continuously keep an eye out for funny business. The ministry and the Directorate general of civil aviation (DGCA) have a lot on their plate and the consumer interest gets mindshare only after it is grossly abused. The government’s other tool to keep fares reasonable, the State-owned carrier Air-India, is battling deeper existential questions. Expecting it to be able to break cartels seems a bit of a stretch. Aviation has come a long way since it was opened up to the private sector in the 1990s, for it to reach the next level the industry is in crying need for a regulator.

Few Indians flew till private airlines arrived offering to take us anywhere in the country at slightly higher than the cost of a train ticket. The freedom to price is what keeps the business ticking and fare wars are healthy to a degree. When pricing turns predatory or, as is the case now, extortionate, the government must step in. That typically happens after some damage is done, unless there is in place an umpire whose sole job would be to ensure the game is being played by the rules. That frees up the aviation ministry to pursue policy and the DGCA to concentrate on technical supervision. Although the DGCA has powers vested in it to do the refereeing, it is not the same thing as a watchdog set up by law. An independent aviation regulator would ideally be at an arms-length from the government as well as the airlines. What we have in practice is a ministry that runs an airline and also regulates its competitors while shaping the future of the industry itself. Praful Patel, the aviation minister, wears too many hats.

The tendency to regulate aviation has split the industry into airport infrastructure and airlines. This is counter-intuitive. There may be some justification for separate technical and economic regulatory mechanisms but the oversight has to be holistic when overlapping matters surface. Stand alone regulators for airports and airlines means some issues like landing fees fall between the cracks. An effective umpire should be able to mediate every aspect of the business: safety of aircraft, air traffic control, quality of airports, and pricing of airport and airline facilities. As of now, each is looked after by a separate agency and all of them report to the aviation ministry. Such fragmentation makes for patchy oversight. There’s no reason for Indian aviation to fly by the seat of its pants when examples abound of sophisticated regulatory systems across the world.