9 Apr 2021

Liberalization in the mid to late nineties in the Indian Aviation sector saw a number of private players entering the sector and during the implementation of the Eleventh Five-Year Plan (2007-2012), India emerged as the ninth largest civil aviation market in the world. The Eleventh Five-Year Plan period witnessed a rising trend of domestic carriers adopting the low cost carrier model.

REGULATORY FRAMEWORK-

REGULATORY AGENCIES

  • Directorate General of Civil Aviation

The main regulatory body established under the ministry of civil aviation is The Directorate General of Civil Aviation (“DGCA“) that supervises civil aviation in India. The functions of the DGCA include

  • regulation of air transport services to and from and within India in compliance with the Aircraft Rules, 1937,
  • licensing of pilots,
  • aircraft maintenance engineers and monitoring of flight crew standards registration of civil aircrafts and certifying their airworthiness,
  • investigation of minor air incidents and providing technical assistance to Courts / committees of Inquiry appointed by the Government;
  • supervision over Flying/Gliding Clubs, licensing, safety oversight and surveillance of aerodromes and air carriers,
  • advising the Government on matters relating to air transport including bilateral air services agreements with foreign countries.
  • Airports Authority of India

The Airports Authority of India (“AAI“) was established by the Airports Authority of India Act, 1994 and was formed as a result of merger of International Airports Authority of India and National Airports Authority through the Airports Authority Act, which came into existence on 1st April 1995. The authority was constituted with a view to accelerate the integrated development, expansion and modernization of the operational, terminal and cargo facilities at the airports in the country conforming to international standards, the AAI is entrusted with the task of regulating airports all over India.

  • Bureau of Civil Aviation Security 

The Bureau of Civil Aviation Security (“BCAS“) was initially set up as a cell of the DGCA in 1978. Its basic functions was to coordinate, monitor, inspect and train personnel in civil aviation security matters. The BCAS is the regulator for civil aviation security in India. The authority is presently entrusted with the functions which include laying down standards and measures in respect of security of civil flights at international and domestic airports in India and Indian aircraft operators at foreign airports and standards for pre-embarkation security and anti-sabotage measures in respect to civil flights and ensuring their compliance.

  • Airports Economic Regulatory Authority

Airports Economic Regulatory Authority (“AERA“), regulates tariffs and other aeronautical charges, as well as monitors airport’s performance standards. It creates a level playing field and fosters healthy competition amongst all major airports (government owned, public private partnership – based, Private), encourage investment in airport facilities, regulation of tariffs of aeronautical services, protection of reasonable interests of users, operation of efficient, economic and viable airports

RECENT TRENDS-

AMENDED FDI POLICY ON CIVIL AVIATION-

The government has notified changes in Foreign Direct Investment (FDI) norms on civil aviation, which will permit non-resident Indian nationals to own 100% stake of Air India.

The Ministry of Finance on July 27, 2020 vide a notification amended the FEMA (Non-debt Instrument) Third amendment Rules, 2020 under which foreign investments in M/s Air India Limited, including that of foreign airlines shall not exceed 49% either directly or indirectly except in case of those NRIs, who are Indian Nationals, where foreign investments is permitted up to 100% under automatic route.

Substantial ownership and effective control of Air India Limited shall continue to be vested in Indian Nationals as stipulated in Aircraft Rules, 1937.

As per the present FDI Policy, 100% FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic up to 49% and Government route beyond 49%). However, for NRIs 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline.

The government permits 100% FDI under automatic route in helicopter services/seaplane services requiring Directorate General of Civil Aviation (DGCA) approval.

AIRCRAFT AMENDMENT BILL, 2020 –HIGHLIGHTS

Lok Sabha has recently passed Aircraft (Amendment) Bill, 2020 which seeks to amend Aircraft Act, 1934.

The bill seeks to propose STATUTORY STATUS TO REGULATORY INSTITUTIONS and DGCA will be entrusted to carry out oversight and regulatory functions with respect to matters under the bill. BCAS will perform regulatory oversight functions related to civil aviation security. AAIB will carry out investigations related to aircraft accidents and incidents. It was proposed that providing regulatory institutions would improve India’s aviation safety ranking as suggested by International Civil Aviation Organization. (ICAO).

Further, the bill proposes to increase the fine amount for violations of rules from Rs. 10 lakh to Rs. 1 crores for aviation industry players. The central government has been given power to cancel licenses, certificates or approvals granted to a person under the act if the person contravenes any provisions of the act.

– Purti Sharma
Associate advocate/Legal coordinator
ASC Solicitors and Advocates

13 Mar 2019

Growth Potential:

Over the last five years, Indian aviation sector has seen tremendous growth due to strengthening of judicious regulations and appropriate policy support. India is committed to growing the industry by encouraging and opening new segments.

Over 30 industry leaders have discussed 5-key sessions covering the Drone-Ecosystem Policy Roadmap, Roadmap for Manufacturing Aircraft and associated equipment, including Regional Transport Aircraft, in India, the Project Rupee Raftaar- Aircraft Financing and Leasing from India, the National Air Cargo Policy, and the Mission to transform Indian Airports into Next-Gen Aviation Hubs.

The Ministry of Civil Aviation, organized “the Aviation Conclave 2019” with an overarching theme of “Flying for All” in New Delhi on 27 February 2018, to bring about a veritable revolution in the Indian aviation sector, which was attended by 85 countries and over 1,300 global aviation fraternity to bring new aviation business to India, in particular, drones systems, manufacturing of aircraft in India, financing and leasing of aircraft from India by Indian and foreign airlines, transforming Indian airports into next-gen aviation hubs, and unleashing the air cargo potential by integrating every village of India in global value chains thereby bringing together industry leaders.

Investment allowed by Government:

Ground Handling Services- FDI up to 74% and investment by Non resident Indians (NRI) up to 100% allowed under the automatic route subject to sectoral regulations and clearances.

1. RENOVATION OF EXISTING AIRPORTS

Civil Engineering

The Civil Engineering Department, consisting of Civil and Structural Engineers, undertakes structural design of passenger and cargo terminals, aircraft hangars, runways and other pavements, technical buildings for installation of airport ground aids etc. for AAI’s in-house requirements and consultancy projects. To ensure timely completion of projects, without cost overrun, the department adopts its proven technique of deputing a Project In-charge for each of the projects undertaken, within the organization and on consultancy basis, with adequate delegated powers.

The department is facilitated by in-house soil and material testing laboratory and the R&D Unit which have rendered valuable work on engineering especially in utilization of locally available material, adoption of new techniques for pavement design and pavement evaluation etc. The safety aspects of aircraft operations like maintenance of friction level of runway and riding quality of runway surface are also ensured by the Civil Engineering Department.

The project management teams, under the Project In-charges carry out the bulk of activities including project monitoring, contract management and quality control. The department has proven track record in successfully completing major projects undertaken by AAI at international level, under difficult logistics and varying climatic conditions prevailing at project’s sites and also during the construction of strategically important airports in India like the airport at ‘Agatti’ in the Lakshwadeep islands and the airport at Leh at 10,683 ft. AMSL. AAI has successfully completed the New Terminal Building Project at Jaipur, Udaipur, Srinagar, Dehradun, Cooch Behar, Gaya, Dibrugarh, Nagpur, Aurangabad, Pune, Calicut, Vizag, Trichy, and Mangalore. New Terminal Building projects are under construction at Varanasi, Lucknow, Barapani, Ranchi, Raipur, Madurai, Mysore, Coimbatore, Ahmedabad, Bhopal and Indore. A new greenfield airport at Pakyong, which became the only airport in the State of Sikkim, is coming up with latest terramesh/green terramesh technology where the height of cut/fill is up to 50 meter. Planning for new green field airports at Cheithu, Itanagar to handle ATR-72 type of aircraft with ILS facility is in progress.

A separate wing under the Civil Engineering Department normally looks after the day to day maintenance requirements of the civil engineering aspects of airport management and operations.

The Civil Engineering Department of AAI is not only capable but willing to accept any challenge in the field of airport civil engineering to add additional feathers in its cap.

Electrical Engineering

The Department of Electrical Engineering is consisting of a team of dedicated Electrical Engineers, having the wide range experience in various specialized E&M services for Airport Terminal Buildings & Airfield Lighting Works. The jobs includes designing, planning and execution of various Electrical & Mechanical works comprising indoor lighting schemes, external lighting works, central air-conditioning of terminal buildings, power supply schemes including standby power generating sets, fire fighting & fire alarm systems, Electro-Mechanical equipment’s like Elevators, Escalators, Travellators, Passenger Boarding Bridges, Elevated cargo transfer vehicle (ETV) & Cargo storage and re-trivial system etc. at various Airports. In addition they are also responsible for planning, designing and execution of ground lighting works comprising of Runway Lighting, Taxiway Lighting, Approach Lighting and other equipment connected with landing and navigation of the Aircrafts. The Engineering Department is also responsible for constructing and maintaining the buildings/structures in which communication and other electronic equipment, used for landing and navigation of Aircrafts, is housed. Internationally approved standards in the electrical installations are adhered to keep fully abreast with the ever changing techniques and needs of the Passengers and the Airlines.

The Department of Electrical Engineering maintains close interaction with the Department of Airport Planning, Civil Engineering, CNS (Planning), Airport Operations, Air Traffic Management etc. for an integrated approach to airport projects ensuring user friendly airport designs, safe aircraft operations and timely completion of works.

1.MRO ACTIVITIES

Maintenance, Repair, Overhaul (MRO) in aviation is the repair, service, or inspection of an aircraft or aircraft component. It is essentially all of the maintenance activities that take place to ensure safety and airworthiness of all aircrafts by international standards.

India’s aviation sector has become the world’s fastest-growing aviation market. According to a passenger forecast issued by the International Air Transport Association (IATA), it is expected to become the third largest aviation market by 2026. A smaller part of this prediction is the business aviation industry, which has been on a slow upward trajectory. The industry saw phenomenal growth between 2006 and 2009, and the industry has maintained a slow-paced growth thereafter. India has the largest fleet of charter aircraft in Asia, and is mainly dominated by mid-size private jets. The present industry comprises 139 business jets, 248 helicopters and 102 turboprops. Popular aircraft in the Indian market are the Falcon 2000, Hawker 850XP and Cessna Citation XLS.

The role played by the Business and General Aviation industry is finally seeing a rising trajectory as the Government of India accelerates its vision to improve air connectivity and tourism in India. The General Aviation (GA) market, which includes business jets, is expected to grow at almost 10% per annum to cross about 16 billion INR. The sector comprises aircraft owners, pilots, engineers, technicians, operations staff, and also the regulator, who continue contribute directly and indirectly to the GDP in a significant manner.

MRO work for aircraft registered in India must be treated as deemed export and the irregularities in tax structure faced by the Indian MRO industry when compared with their overseas competitors must be eliminated.

MROs should be included in the harmonized list of infrastructure sub-sectors. Engine and component MROs should also be included under infrastructure, even if they are not located at an airport, to enable them to compete with overseas rivals.

MROs in India, which are capable of maintaining the engines and the components of foreign operators, should be allowed to export substitute engines and components to these foreign operators against the equipment sent to India for MRO work.

The current deficiency in technological expertise will have to be met through skill development. The Ministry of Civil Aviation (MoCA) has drawn up plans to set up a National Aviation University (NAU). BAOA has also embarked an ambitious plan to start its own training academy to meet the requirements of the BA/GA industry.

The biggest boost to ‘Make in India’ and to ‘Skill India’ will be growth in numbers of aircraft, be it scheduled airliners or business aircraft. The government must pull out all stops to ensure fleet growth and more jobs. Every tax and import duty application, or procedure needs to be looked at through this prism.

2.ENTRY OF FOREIGN AIRLINES INTO DOMESTIC SECTORS

As per the present FDI Policy, 100% FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic upto 49% and Government route beyond 49%).  However, for NRIs 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline.  Further, FDI is subject to the condition that Substantial Ownership & Effective Control (SOEC) shall be vested in Indian Nationals as per aircraft rules, 1937.  However, for M/s Air India Ltd., as per the present policy, foreign investment(s) in M/s Air India Ltd. Including that of foreign Airline(s) shall not exceed 49%, either directly or indirectly, subject to the condition that substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals.  Therefore, although 100% FDI is permitted under automatic route for NRIs in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline, it is restricted to be only 49% in case of M/s Air India.

Benefits:

In light of the proposed strategic disinvestment of 100% of M/s Air India Ltd. by the Government of India, M/s Air India Ltd. will have no residual Government ownership and will be completely privately owned, it has been decided that foreign investment in M/s Air India Ltd

be brought on a level playing field with other scheduled airline operators.  The amendment in FDI policy will permit foreign investment in M/s Air India Ltd at par with other Scheduled Airline Operators i.e. upto 100% in M/s Air India Ltd by those NRIs, who are Indian Nationals.  The proposed changes in FDI Policy will enable foreign investment by NRIs into M/s Air India Ltd. upto 100%, under automatic route.

Above amendment to the FDI Policy are meant to liberalise and simplify the FDI policy to provide ease of doing business in the country.  Leading to largest FDI inflows and thereby contributing to growth of investment, income and employment.

Background:

FDI is a major driver of economic growth and a source of non-debt finance for the economic development of the country. The FDI policy is reviewed on an ongoing basis, with a view to attract larger volumes of foreign investment inflows into the country. Government has put in place an investor friendly policy on FDI, under which FDI up to 100% is permitted on the automatic route in most sectors/activities.

FDI policy provisions have been progressively liberalized across various sectors in the recent past to make India an attractive investment destination. Some of the sectors include Defence, Construction Development, Trading, Pharmaceuticals, Power Exchanges, Insurance, Pension, Other Financial Services, Asset Reconstruction Companies, Broadcasting, Single Brand Retail Trading, Coal Mining, Digital Media etc.

These reforms have contributed to India attracting record FDI inflows in the recent past.  FDI inflows in India stood at US $ 45.15 billion in 2014-15 and have consistently increased since then.  FDI inflows increased to US $ 55.56 billion in 2015-16, US $ 60.22 billion in 2016-17, US $ 60.97 billion in 2017-18 and the country registered its highest ever FDI inflow of US $ 62.00 billion (provisional figure) during the last Financial Year 2018-19. Total FDI inflows in the last 191/2 years (April 2000- September 2019) are US $ 642 billion while the total FDI inflows received in the last 51/2 years (April 2014- September 2019) are US $ 319 billion which amounts to nearly 50 % of total FDI inflow in last 191/2 years.

Global FDI inflows have been facing headwinds for the last few years. As per UNCTAD’s World Investment Report 2019, Global Foreign Direct Investment (FDI) flows slid by 13% in 2018 to US $1.3 trillion in the previous year, that is the third consecutive annual decline. Despite the dim global picture, India continues to remain a preferred and attractive destination for Global FDI flows. However, it is felt that the country has the potential to attract far more Foreign Investment which can be achieved, inter-alia, by further liberalizing and simplifying the FDI policy regime.

Maintenance and Repair of Aircrafts, Airports and Hanger:

Flying training institutes; and technical training institutions – FDI up to 100% allowed on the automatic route. The potential in maintenance and repair is really good as India is resorting to Greenfield airports, from a shift from conventional airport, which will be profitable. Currently, every major city has either under construction or proposed a Greenfield airport with 6 well established and successfully running airports. India being a developing country possesses a great potential in the maintenance and repair of aircrafts, airports and hanger and is thus attracting various investments (both domestic and international) for great profitability.