Intellectual Thoughts by Sanjay Panda: October 2015

Govt. of India new aviation policy draft seeks to help "Everyone fly".

Incentives to fly to small towns at affordable costs and easing the norms for domestic carriers to operate services abroad are some of the highlights of the new draft aviation policy, released on on 30th Oct for feedback before finalisation.

Among other things, the draft policy proposes to rationalise jet fuel cost, promote air cargo, maintenance, repair and operations (MRO) through fiscal and regulatory concessions

 Here are highlights and likely impact :
  • Open sky for countries beyond 5,000 km radius from New Delhi

    IMPACT: To benefit airlines from Europe, Asia, Middle East  among others, to operate to and from India without restriction on of flights, seats
  • Auction seats for those in 5,000 km

    IMPACT: India will earn from auction proceeds; airlines from Gulf, West Asia and South East Asia will be able to increase frequency to and from India
  • Increase in FDI cap from 49% to above 50% to be considered in 2020

    IMPACT: Would open doors for participation of more foreign carriers in Indian aviation sector
5/20 RULE ( i,e  5 years of Minimum  operational experience and  fleet of 20 Aircraft)
  • Uncertainty remains as three ways considered: keep it, scrap it or replace it with credit-based system

    IMPACT: New domestic airlines  would have to wait longer to fly abroad due to lack of clarity on 5/20
  • To encourage development of airports through PPP mode

    IMPACT: Would help in modernisation of airports
  • Fares to be capped at Rs 2,500 per hour flying on regional airports; Proposal to levy 2% cess on tickets and use collection to fund airlines' losses if they fly to remote areas;  80% funds to flow from Centre, rest from states.

    IMPACT: Move would incentivise development of low-cost airports, Domestic, international fares would go up; 2% .
  • Policy to continue; additional routes to be added to Category-I (metro) routes

    IMPACT: Airlines would have to deploy a share of traffic to non-metro regions; won't be able to withdraw from there
  • Airlines can handle operations related to flight on their own through contract workers

    IMPACT: Help airlines reduce cost of operations.
 Link to policy document  Draft

Among other things, the draft policy proposes to rationalise jet fuel cost, promote air cargo, maintenance, repair and operations (MRO) through fiscal and regulatory concessions and frame separate regulations for promoting helicopter operations.
The ministry has considered a slew of fiscal incentives for stakeholders in the draft policy across the country’s fledging aviation industry to reduce operating costs for airlines and rationalise air fares.
The ministry is looking at tax waivers to incentivise stakeholders across the value chain for a specified period of time. The growth in the sector would be evaluated thereafter and the tax breaks realigned.
Regulations for bilateral agreements between India and other countries are proposed to be changed with an option to auction seats. The ministry is considering linking the opening up of Indian skies with liberalisation of FDI in Indian airlines. ‘We will consider extending FDI in Indian airlines beyond 49 per cent. This will be linked to India’s open skies arrangement with other countries. The current system of traffic rights is based on
bilateral arrangements but once there are open skies it does not make much sense to distinguish between domestic and foreign carriers’, said a senior ministry official.
- See more at:

IMF warns of 'Triad' of risks facing global economy

  • Global growth moderate and uneven, forecast at 3.1 percent this year, 3.6 percent in 2016
  • Disparate fortunes between the advanced and emerging market and developing economies
  • Lower commodity prices weigh on commodity exporters
The IMF’s latest World Economic Outlook (WEO) foresees lower global growth compared to last year, with modest pickup in advanced economies and a slowing in emerging markets, primarily reflecting weakness in some large emerging economies and oil-exporting countries.

Recovery in advanced economies on course
Growth in advanced economies is projected to increase modestly to 2 percent this year and 2.2 percent next. This modest increase primarily due to declining oil prices, accommodative monetary policy, and improved financial conditions, and in some cases, currency depreciation.

Slower growth in emerging and developing economies
Growth prospects in emerging markets and developing economies vary across countries and regions. But the outlook in 2015 is generally weakening, with growth for these economies as a group projected to decline from 4.6 percent in 2014 to 4.0 percent in 2015.

Growth in low-income developing economies is expected to slow to 4.8 percent in 2015, from 6 percent in 2014,

Downside risks more significant

The WEO report outlines important shifts that could stall global recovery. These include:

Lower oil and other commodity prices, which although benefiting commodity importers, complicate the outlook for commodity exporters, some of whom already face strained initial conditions (e.g., Russia, Venezuela, Nigeria).

A sharper-than-expected slowdown in China  if the expected re balancing toward a more market-based and consumption-driven growth proves more challenging than expected.

Disruptive asset price shifts and a further increase in financial market volatility could involve a reversal of capital flows in emerging market economies.

• A further appreciation of the U.S. dollar could pose balance sheet and funding risks for dollar debtors, especially in some emerging market economies,

Increased geopolitical tensions in Ukraine, the Middle East, or parts of Africa could take a toll on confidence.


source : IMF website