Draft National Civil Aviation Policy 2015

On October 31, 2015, the NDA Government has put a Draft National Civil Aviation Policy 2015 in public domain and invited comments from all stakeholders. The policy will be revised after public comments and will come in effect possibly from April 2016. The salient points have been summarized below:

Key Proposals

On 5/20 rule

The policy keeps all options open on 5/20 rule i.e. to abolish it, to tweak it or to replace it with DFC (Domestic Flying Credits) system.

Route Dispersal Guidelines

The government has decided not to scrap the RDGs. Instead, more rotes will add to the Category-I.

Open Sky Policy

The government has proposed to open the skies for destinations outside 5,000 km from New Delhi. This would help Europe, Australia, South America among others to operate flights to and from India without any restriction on the number of flights and seats.

Regional Connectivity Scheme

The policy proposes that a regional connectivity scheme will commence from 1 April 2016 in which the airfares for a one-hour flight will be capped at Rs. 2,500. This has to be done via revival of un-served or under-served airstrips. The government will create a Regional Connectivity Fund by charging 2% cess on air tickets on international and domestic routes excluding the intra-remote areas for viability gap funding.

Maintenance, Repair and Overhaul (MRO) Industry

For MRO industry,  the policy suggests various tax rebates and incentives. It proposes to make MRO services exempt from service tax; custom free import of  MRO tools & toolkits; free stay for foreign aircrafts in India for MRO purpose for six months; Prompt visa to Foreign MRO experts, Temporary Landing Permits for foreign pilots operating an aircraft to and from India for the purpose of servicing etc.

Code Share Agreements

The airlines in India will be free to enter into code-share agreements with foreign carriers for any destination within the country on a reciprocal basis. No prior government approval will be needed for this.

Services At airports

The airlines will be allowed to self handle the services at airports including check-in, luggage handling, aircraft cleaning and servicing, loading and unloading of food and beverages.

Helicopter hubs

Government to launch a separate set of regulation for helicopters by 1 April 2016 to facilitate the development of four helicopter hubs.

Airport Development

The airports will continue to be developed via PPP model.

Taxation measures

Tax incentives will be given to airlines to boost the aviation sector especially in custom and not on aviation fuel. Proposed a slew of tax incentives for airlines and maintenance works.


Proposed hiking Foreign Direct Investment (FDI) in domestic airlines to over 50 per cent in open skies policy, which is 49 per cent at present.


Airlines will not be allowed to charge more than 2500 rupees for one hour flight between two small cities under regional connectivity scheme. Proposes 2 per cent levy on all domestic and overseas tickets for funding the Scheme.

Critical Analysis

The key notable proposals in the Draft National Civil Aviation Policy are on viability gap funding for regional routes, liberal bilateral traffic rights, opening up foreign direct investment (FDI) in aviation, self-handling airport operations and retaining the route dispersal guidelines. The policy aims to provide affordable flights to small-towns and small income travellers. It opens the civil aviation sector to large number of foreign airlines and aims to create jobs by making India an Asian hub for  MRO industry. However, it has not correctly addressed the ambiguous 5/20 rule that distorts the level playing field for new airlines. Further, the policy proposes to impose cess on some routes (to provide regional connectivity) and lower airfares on less dense routes. It does not guarantee increase in traffic. This approach might not prove to be correct because it still does not encourage flying to and from new destination.

We note that out of 476 airports and airstrips, only 75 are in use at present. The airports are under-utilized because of lack of adequate demand. There is a need for setting no-frills airports in non-metro cities with centre-state cooperation.

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