Ajit Singh sees $12.1-bn investment in airport infrastructure in 12th Plan

The rapid expansion of air transport network and opening up of the infrastructure to private sector participation have fuelled the growth of air traffic in India and the government envisages an investment of $12.1 billion in the airport sector during the 12th Plan period, civil aviation minister Ajit Singh said today.

The minister said this while launching the `India Aviation – 2014' in New Delhi today.

''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,'' the minister said.

''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,'' he noted. 

He said the opening up of airport infrastructure to private investment has fuelled growth in air traffic in the country, adding that 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.

Meanwhile, Ajit Singh said, airlines are expected to invest around $27.5 billion to add around 370 aircraft to the existing fleet by the year 2017. The size of the commercial aircraft fleet, including renewals, is expected to reach 1,000 by 2020, from the current 400, he said, adding that the estimated investment requirement for the general aviation aircraft alone would be of the order of $4 billion by 2020.

He said of the overall investment of $12.1 billion required for airport infrastructure during the 12th Plan, $9.3 billion is expected to come from the private sector, for construction of new airports, expansion, modernisation 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, etc.

At the same time, the development of world class ground handling, cargo, logistic facilities, including high-output distribution centres at major airports, etc, would also require huge investment, he said.

He said the government's aviation policy and regulatory reforms are also aimed at encouraging private participation and investments in the sector. The government has recently hiked foreign investment limit in airlines to 49 per cent to help the industry face the challenges, he added.

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. Indian carriers have also been allowed to import ATF directly, he added.

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, he pointed out.

Besides, the government has allowed flexi use of airspace by civil and military users, which permits them to efficiently and effectively utilise the available airspace on a sharing basis. This would result in optimum usage of airspace, enhancement of airspace capacity, minimising delays, conservation of fuel, reduction in emissions and ultimate benefits to travelling public, he said.

According top the minister, the flexible use of air space by direct routing between seven major city pairs alone is expected to reduce carbon emissions by about 7 million kg per annum.

The government is in the process of formulating a policy to promote regional connectivity, incentivising 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.

The government has also proposed the creation of an Essential Air Services Fund 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 equipment from three months to one year, exemption of custom duty on parts, equipment, 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,'' Ajit Singh said.

''To spur the growth of international air travel, the government has taken substantial steps to liberalise 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 per cent over the existing traffic rights.

''Another important move that has accelerated the modernisation and development process is the privatisation 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, a series of policy reform decisions are under consideration. These include getting ATF declared as notified product and 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 and 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.

Going forward, the minister said the Indian aerospace market would offer tremendous long-term opportunities such as providing maintenance repair and overhaul services, ground handling services, manpower training, building an efficient airspace and air traffic management system, air cargo services, establishing aircraft designing & manufacturing centres etc, considering the growth prospects of air traffic and the potential for large scale acquisition of aircrafts by the carriers and substantial investment projections.