Aviation to put more on sale

Under the new civil aviation policy, the Government will privatise small and unviable airports through subsidy, reports Arun Kumar.

india Updated: Apr 11, 2006 15:45 IST
Arun Kumar

Privatisation in the aviation sector is set to get another leg-up. Under the new civil aviation policy, which will come up for cabinet approval soon, the government will privatise small and unviable airports through subsidy, which will be decided through a competitive bidding process.

Unviable routes too will be provided subsidy — again through a bidding process. This means the government will invite bids from private parties to operate and manage small airports. The lowest bidders (who need the lowest subsidy support) will be awarded the airports.

Also, the draft policy favours relaxing the restriction on minimum distance for developing another airport.

Currently, no greenfield airport is allowed within an aerial distance of 150 km of an existing airport.

The draft policy suggests that the government’s aim of providing regional connectivity and ensuring development of uneconomical airports will be met through a non-lapsable Essential Air Service Fund (EASF).

This fund will be constituted by levying a cess on domestic and international air travel. The draft policy clarifies that the EASF will be established outside the Consolidated Fund of India and an independent board will manage it. Besides subsidies to unviable airports and unviable routes, EASF will provide soft loans for improvement of existing airports and establishment of new airports.

After the new system becomes operational, the route dispersal guidelines will be progressively replaced.

The guidelines say a transparent process of minimum subsidy would enable the subsidy to go the most efficient operator at the lowest cost to the public and may also lead to development of specialised smaller airlines as well as subsidiaries of main airlines.

Importantly, it will relieve Indian (Airlines) of the burden of servicing uneconomical routes, say the draft guidelines.

A transparent inter-ministerial mechanism will identify uneconomical routes, decide minimum capacity requirements and oversee the bidding process.

First Published: Apr 11, 2006 02:46 IST