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Tuesday, 23 September 2014 00:00
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Can’t force airlines to fly to small towns

The aviation ministry’s route disbursal guidelines are a perfect example of how political and bureaucratic solutions don’t really work, no matter how practical they may seem. In this case, the aviation ministry came up with a weightage system for airlines to fly to small towns, and various sweeteners were added to this. So, if airlines flew using smaller aircraft, their score increased as compared to a situation in which they flew using a bigger aircraft. In other words, the way the plan was to work out, smaller air taxi operators could, in effect, fly under a Jet Airways or Indian Airlines flag and the ‘credit’ would go to the bigger airline. Over the last few days, however, several airlines have said this was not viable. So, in effect, the policy seems to be dead in the water.

In the past, too, similar fiat schemes have come a cropper, the most famous being the telecom ones that mandated telcos to provide village telephony. Interestingly, while telcos paid penalties for not meeting their rural obligations, in more recent years, they have far exceeded any commitments they might have had. Indeed, it is no longer the state-owned BSNL that is providing the most rural phones—it was beaten to this years ago by Bharti Airtel, and today Vodafone and even Idea Cellular have more rural connections than BSNL. What happened is that, as the rural market developed, it became attractive, and private telcos saw a business opportunity.

This is where the government got it wrong in aviation—it needed to adopt the telecom model. So, more than a decade ago, the Naresh Chandra committee had suggested an Essential Air Services Fund (EASF) by levying a cess on all flights and using this to give direct subsidies to airlines. This, along with the kind of air-taxi policy being talked of now—with, say, benefits for flying to small-town India, would provide a big fillip to such flying. Ironically, state governments have experimented with schemes that have worked, and that should have been a template for the aviation ministry. As FE has reported earlier, with states like West Bengal, Jharkhand, Chhattisgarh and Madhya Pradesh allowing sales of ATF at lower rates in case airlines were flying within the state, airlines have changed their flight plans so as to fly to more small towns as this helped them lower aviation fuel costs. Given this, it would be a good idea for the aviation ministry to revisit the idea of the EASF and perhaps use this to subsidise the cost of ATF which will incentivise flying to small-town India. Only solutions that work with the market have a hope of succeeding.



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