Industrial
Promotion Policies - Central Government
Domestic Air Transport Policy
Introduction
On 28th May, 1953 consequent to the coming into force of the Air Corporations Act, 1953 - Government of India nationalised the airline industry. In accordance with this act, the two air corporations, viz. Indian Airlines Corporation and Air India International, were established and the assets of all the then existing air companies (nine) were transferred to the two new Corporations. The operation of scheduled air transport services was made a monopoly of these two Corporations and the Act prohibited any person other than the Corporations or their associates to operate any scheduled air transport services from, to, or across India.
However, after 40 years, in 1994 the wheel had turned a full circle as the Air Corporation Act, 1953 was repealed with effect from 1.3.94 and with that ended the monopoly of the Corporations on scheduled air transport services. The air transport in India has been opened to operation of scheduled services by any carrier who fulfils the statutory requirements for operation of scheduled services.
Air Taxi Scheme
Since 1986 upto the repeal of the Air Corporations Act 1953 in March 94, private airlines were allowed to operate charter and Non-scheduled services under Air Taxi Scheme which meant, inter-alia that they could not publish time schedules, or issue tickets to passengers. The Air Taxi Scheme was introduced in 1986 to boost tourism and augment domestic air services. The scheme was progressively liberalized.(Salient features at ANNEXURE-I)
Policy Guidelines for Starting Air Taxi and Scheduled Air Transport Services
The repeal of Air Corporations Act. 1953 with effect from 1.3.1994 has demonopolised the domestic air transport services and enabled private operators to provide scheduled air transport services. However, in order to ensure safety, security and orderly growth of air transport services and keeping in view the infrastructure constraints at a number of airports, Government is permitting addition of some limited capacity to existing operators and import / acquisition of any type and size of aircraft to operators based on the projections of traffic growth.
Changes In the Policy on Domestic Air Transport Services
a. Although no scientific appraisal of the performance of private operators has been carried out, it generally appears that but for one or two jet aircraft based operators and a couple of other regional airlines, no private operator has been able to provide regular, stable and professionally run air transport service in the country.
b. A need was, therefore, been felt to review the existing policy guidelines and suggest modifications which could lead to orderly development of domestic air transport industry in a healthy competitive environment. Accordingly, the Ministry of Civil Aviation prepared a framework of policy for domestic air transport services keeping in view the various parameters.
c. The Cabinet approved the policy paper on 24.1.1997. Salient features of the policy framework as approved are at ANNEXURE-II. The Cabinet, however, desired that modalities for NRI/Foreign equity participation in the domestic air transport services sector be formulated and brought up for approval.
d. The modalities for permitting NRI/foreign equity participation in the domestic air transport services sector was approved by the Cabinet on 1.7.1997 (also shown at ANNEXURE-III. On 17.7.1998 comprehensive guidelines in this regard were issued by the DGCA vide AIC No. 4/1998 (ANNEXURE IV).
Scheduled Air Transport Service means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognisably systematic series, each flight being open to use by members of the public.
Non-Scheduled (air taxi) services:
Air Taxi Operation means an air transport service other than scheduled air transport service and may be on charter basis and/or non-scheduled basis. The operator is not permitted to publish time schedule and issue tickets to passengers.
Air Cargo Services:
An air cargo service means air transportation of cargo and mail. Passengers are not permitted to be on these operations. It may be on scheduled or non-scheduled basis. These operations are to destinations within India. For operation outside India, the operator has to take specific permission of DGCA demonstrating his capacity for conducting such operation.
Foreign Equity Participation in Air Transport Services
Under the new policy recently approved:
Foreign equity upto 40% and NRI/OCB investment upto 100% is permissible in the domestic air transport services;
Equity from foreign airlines is not allowed, directly or indirectly, in the domestic air transport services.
Procedure For Starting Air Taxi/Scheduled Air Transport Services
Aircraft Acquisition Committee set up in September, 1994, considers proposals for grant of permission to operate air taxi/scheduled air transport services. Recommendations of the Committee are submitted to the Minister (CA) for approval. The present composition of the Committee is:-
1. Joint Secretary, Ministry of Civil Aviation - Convenor
2. Joint Secretary & Financial Advisor (F.A.), Ministry of Civil Aviation - Member
3. Chairman, Airports Authority India - Member
4. Director General of Civil Aviation - Member
5. Commissioner of Civil Aviation Security, Bureau of Civil Aviation Security - Member
The three stage clearance procedure laid down for starting Air Transport Services is as under:
Issue of NOC for Scheduled/Air Taxi services - The competency and viability of the company to operate air transport service is considered at this stage.
Import permission for aircraft - The details of specific types of aircraft, their airworthiness, seating capacity, mode of acquisition and arrangements of security programme, training facilities for crew and engineers, Operations Manual, maintenance facilities, etc. are looked into by the Committee.
Issue of permit for Scheduled/Non-Scheduled air services - Permit is issued by DGCA after completion of all requirements laid down in the regulations/guidelines.
Applications for stage 1 and 2 clearance as well as for import of aircraft by existing operators are required to be submitted by applicants in the prescribed forms.
The applications are scrutinised on receipt to find out any prima facie deficiency.
After the application is found complete in all respects, it is circulated to the Members of the Committee for comments
The applications are considered in the meeting of the Committee.
The recommendations of the Committee are submitted to the Secretary/Minister (CA) for approval.
The final decision is communicated to the applicant.
NOC holder for Air Taxi/Scheduled Operations is given permit by DGCA after completion of all requirements laid down in the guidelines / instructions.
ANNEXURE-I
BEGINNING OF AIR TAXI SCHEME & CURRENT POLICY: A. OBJECTIVES OF AIR TAXI SCHEME,1986 (AIC No.26/198 dated 14.11.1996)
Boost tourism
Augment domestic air service Operations restricted to
Maximum 10 seater aircraft manufactured abroad & 19 seater aircraft manufactured in India
Notified airports only
Two hours before/after schedule time of national carrier
No import of aircraft permitted
Fares not less than Vayudoot
B. CHANGES IN THE AIR TAXI SCHEME IN 1989-90 (AIC 9/1989 dated 9.8.1989)
Maximum seating capacity increased to 50
Import of aircraft permitted only to NRI's
55 airports notified for air taxi operations
C. CHANGES IN THE AIR TAXI SCHEME IN 1990-91
Extensive liberalisation was announced by Minister of Civil Aviation in Parliament
May 1990
Minimum 15 seats and ceiling on maximum seats removed
Fare restriction abolished
Time restriction withdrawn
Flights permitted to all airports open to scheduled operations
Permitted on non-charter basis also
Prior approval of flights by DGCA dispensed with.
December 1990
The eligibility conditions include :-
a. Citizen of India
b. Group of Indian nationals including NRI
c. Public sector undertaking of Central or State Government
Stipulation of maximum seating capacity removed
Operation of one flight below 700 km for each flight of more than 700 kms.
93 Airports notified for air taxi operations
November 1992
Indian nationals permitted to import aircraft subject to clearance by RBI/Ministry of Finance (liberalised Exchange Rate Management System)
February 1993
Operator to obtain NOC from national carrier if employment to be given to any of its employee
25th February 1993
Upto 40% foreign equity participation under Air Taxi Scheme on a case by case basis approved.
POLICY LIBERALISATION IN 1994
With effect from 1.3.1994 Air Taxi Scheme was liberalized after the repeal of Air Corporations Act 1953.
Restriction for operating scheduled air transport services other than national carriers removed 3.8.1994
Ceiling of 30 seats for new entrants announced by Minister in Parliament. 8.12.1994
Extension of 40% foreign equity participation applicable in air taxi scheme extended mutatis mutandis for scheduled air transport services, on a case by case basis. 8th March 1995(AIC No.3/1995)
1. Eligibility conditions:-
Citizen of India a Non-Resident Indian/OCB (predominately owned by NRIs with at least 60% equity of NRI) allowed 100% equity.
a company registered under the Companies Act, 1956 with or without foreign equity participation excluding NRI equity) limit to 40%;
Central Government or State Government or an Undertaking owned/controlled by such Government.
Under normal passenger category the aircraft to be multi-engined fixed wing and single or multiple engine helicopter.
For imported pressurized aircraft not to exceed 15 years of age or 75% of its designated economic cycles or 45,000 pressurization cycles, whichever is less; unpressurized aircraft normally not to be more than 20 years of age.
8.12.1995
ATOs required to obtain prior clearance of DGCA only if they operate on sectors where there is already a daily service by 2 or more scheduled operators.
ATOs permitted to operate on a sector of scheduled operators if this happens to be less than half of a multi-sector routes.
12.9.1996
Ceiling of 30 seats enhanced to 50 by a statement made by the Minister in Parliament.
MODIFICATIONS IN THE GUIDELINES (Effective 24.1.1997)
Barrier to entry and exit to/from this sector removed;
Only pre-entry scrutiny of applications;
Freedom to choose any type and size of aircraft given to the operator;
Shareholders fund enhanced from Rs.5.00 crores to Rs.10.00 crores and from Rs.1.00 crore to Rs.30.00 crores for aircraft all-up-weight below 40,000 Kgs. and above 40,000 Kgs. respectively.
Induction of total capacity to be pre-determined on the basis of traffic growth projections;
In distribution of pre-determined capacity while preference would be given to Indian Airlines, subject to its ability, there would not be any such restriction on the induction of capacity by private operators.
(Effective 1.4.1997)
Foreign equity upto 40% and NRI/OCB investment upto 100% is permissible in the domestic air transport services;
Equity from foreign airlines is not allowed directly or indirectly, in the domestic air transport services; and
The existing companies operating in the domestic air transport sector in which equity is held by foreign airlines, directly or indirectly, were advised to disinvest equity held by foreign airlines within a period of six months.
On 17.7.1998, vide AIC No. 4/1998, DGCA has issued a set of comprehensive guidelines in this regard (Anexure IV)
The main features of the recently approved policy framework for domestic air transport services are as follows;-
A. As approved on 24.1.1997:
1. Barriers to entry and exit from this sector should be removed. There should only be a pre-entry scrutiny of applications to verify the financial soundness, maintenance, security and safety aspects of operations and human resources development proposed to be undertaken by the applicant.
2. Choice of the aircraft type and size should be left to the operator.
3. To eliminate non-serious entrepreneurs and to achieve economies of scale, the minimum fleet size for a scheduled operator should be raised from the existing three (3) to five (5) aircraft and the minimum amount of the shareholders funds should be enhanced from existing Rs.5.00 crores to Rs.10 crores for aircraft of all-up-weight below 40,000 kgs and from Rs.10 crores to Rs.30 crores for aircraft of all up weight exceeding 40,000 kgs.
4. Induction of total capacity in the air transport sector should be predetermined on the basis of trend growth of traffic and projections made for at least a period of five years on annual basis. This information should be widely publicised to enable the entrepreneur to take investment decisions.
5. In the distribution of this predetermined capacity for induction, while preference will be given to Indian Airlines according to its fleet augmentation plan subject to its ability to do so, to meet a share of additional capacity that would emerge each year, there would not be any pre-determined restriction on the induction of capacity by private operators.
6. The present policy of route dispersal guidelines be retained and strictly enforced. According to these guidelines, all scheduled operators are required to deploy in the North-East, Jammu & Kashmir, Andaman Nicobar Islands and Lakshadweep 10% of their capacity deployed on the specified trunk routes.
7. Foreign equity upto 40% and NRI/OCB investment upto 100% is permissible in the domestic air transport services;
8. Equity from foreign airlines is not allowed, directly or indirectly, in the domestic air transport services; and
9. The existing companies operating in the domestic air transport sector in which equity is held by foreign airlines, directly or indirectly, would be advised to disinvest equity held by foreign airlines within a period of six months.
The following guidelines for foreign equity participation in the domestic air transport sector are issued for information, guidance and necessary action.
This supersedes AIC 2/1998 dated 11.06.98.
H.S.KHOLA
Director General of Civil Aviation
---------------------------------------------------------------- GUIDELINES FOR FOREIGN EQUITY PARTICIPATION IN THE DOMESTIC AIR TRANSPORT SECTOR
The Domestic Air Transport Policy
approved by the government provides for foreign equity
participation upto 40% and investment by Non-Resident
Indians(NRIs)/Overseas Corporate Bodies (OCBs) upto 100%
in the domestic air transport services. Foreign airlines
are, however, not permitted to pick up equity directly
or indirectly. It has, therefore, become necessary that
guidelines for interpretation of indirect investment by
foreign airlines, which are in conformity with the provisions
of the Aircraft Rules, 1937 and the existing Domestic
Air Transport Policy, are promulgated. Accordingly, the
following guidelines are issued with the approval of the
Government:
i. Permission to operate scheduled services will be granted
either:-
1. to a citizen of India; or
2. to a company or a body corporate provided that;
a. It is registered and has its principal place of business
within India;
b. Its Chairman and atleast two-thirds of its Directors
are citizens of India; and
c. Its substantial ownership and effective control is
vested in Indian nationals.
ii. Foreign Financial Institutions and other entities
who seek to hold equity in the domestic air transport
sector, shall not have foreign airlines as their shareholders.
iii. An applicant shall be required to furnish full and
detailed information with regard to the shareholding of
any airline in the foreign investing institution/entity,
if any, and composition of the Board of Directors and
senior management of the said foreign investing institution/entity.
iv. An applicant who seeks permission to operate air transport
services in the domestic sector shall be required to give
a declaration that no foreign airline is in financial
or commercial tie up with him or has the management/ownership
interest in him.
v. While the foreign investing institution/entity which
seeks to hold equity in the domestic air transport sector
may have representation on the Board of Directors of the
Company, such representation shall not exceed 1/3rd of
the total.
vi. Any Foreign Financial Institution/entity which seeks
to make investment in the domestic air transport sector
shall not be a subsidiary of a foreign airline. A leasing
company leasing aircraft to an operator in the domestic
air transport sector, shall also not be a part of an airline.
However, wet leasing of an aircraft may be allowed from
any source subject to the fulfillment of the guidelines
issued by the Government/DGCA.
vii. A domestic sector air transport operator shall not
have agreements such as shareholders agreements etc. with
a foreign airline, containing provisions/arrangements
empowering such foreign airlines or others on their behalf
to have effective control in the management of the domestic
airline.
viii. A domestic air transport operator shall not enter
into an agreement with a foreign airline which may give
such foreign airline the right to interfere in the management
of the domestic operator.
ix. A domestic air transport operator may enter into financial
arrangements with a bank and/or other financial institutions
for the purpose of lease finance, hire purchase or other
loan arrangements, but such a tie up shall not be permitted
with a foreign airline.
x. Management contract with a foreign airline shall also
not be permitted to a domestic air transport sector operator.
xi. Marketing arrangements such as ground handling, general
sales agency, code sharing, interlining will, however,
be permitted.
xii. A domestic air transport sector operator will also
be permitted to get maintenance, overhaul, repair works
done and training of pilots/engineers conducted either
at the facilities available with other airlines or those
certified by the Director General of Civil Aviation on
such terms as may be prescribed.
xiii. A domestic air transport sector operator may be
permitted to employ foreign pilots/engineers till he is
able to train his own manpower. This shall, however, be
permitted with the express approval of the competent authority
and for such period and terms as may be prescribed by
the said authority.
xiv. An applicant who seeks permission for domestic air
transport operations will be required to give a declaration
that he fulfills all the requirements mentioned in the
above guidelines and in case of any change, he shall notify
the competent authority within one month of such change.
In addition, the applicant will be required to furnish
such a declaration every year.
xv. A domestic air transport operator, who furnishes wrong
information in respect of any of the above prescribed
guidelines at any stage shall be liable for suspension/cancellation
of his operating permit.
