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A Policy Caught In Discord

Rule 5/20 has become a bone of contention, stalling the formulation of new aviation policy. A war of words has started among airlines, finds Amresh Srivastava

Policy Pulse
Publish Date: Mar 21 2016 5:35PM | Updated Date: Mar 21 2016 5:50PM

A Policy Caught In Discordphoto : Hrishikesh bhatt

Rule 5/20 has become a bone of contention, stalling the formulation of new aviation policy. A war of words has started among airlines with an eye on cornering busy routes. Thus, all eyes are on the Ministry of Civil Aviation that assures to announce the policy by the end of March, finds Amresh Srivastava

 
The move to replace the 5/20 policy in Indian aviation sector has initiated a bitter tussle between the old and new airlines over continuation of this regulation. This has resulted in the delay in coming up with the draft of Civil Aviation Policy for Cabinet’s approval. Ratan Tata, the chairman emeritus of the Tata Sons, has advocated for the removal of this by saying this is protectionist rule of the Government which suits the old airlines. Despite the bitter dogfight between the old and new airliners, the Government is hopeful to find an amicable solution and the policy is likely to be approved by the cabinet latest by the end of March 2016.  It is said that the Government is in advanced stages of finalising the new civil aviation policy, which includes the final call on the 5/20 norm.
 
The Indian aviation industry is divided over the issue of ‘5/20 rule’.  IndiGo, Jet Airways and SpiceJet, operating international flights at present, have all opposed the proposal to abolish the rule. They are arguing that this move will impact their market. However, the new airlines Vistara and Air Asia India are in favour of scrapping the existing rule which is restricting them to fly on international routes from India.
 
The inter-ministerial panel on this issue, headed by the Union Home Minister Rajnath Singh, is understood to have recommended replacing 5/20 flying norms for domestic carriers to go international. The last meeting of this committee held on 5th March, is said to have discussed various aspects of the proposed draft civil aviation policy. There has been no official word yet but as per knowledgeable sources, the panel is said to have pitched in for scrapping the 5/20 norm and replace it with some other norms. The other members of this panel the Surface Transport Minister Nitin Gadkari and the Civil Aviation Ministry Ashok Ganapathi Raju also attended the meeting.
 
This meeting assumed significance as the old and new airline operators are engrossed in a bitter war of words over the international flying norm called 5/20. The row started when Ratan Tata called for the removal of this rule. The Tata group has its stakes in two airlines, Air Asia and Vistara.  Similarly the Federation of Indian Airlines (FIA) which has Jet Airways, IndiGo, SpiceJet and GoAir as its member, has fiercely opposed to proposed termination of 5/20 rule. This rule prescribes that an airline which has minimum five years of operational experience in domestic sector and a fleet of 20 aircraft to go on international sector. The Ministry of Civil Aviation brought a new draft aviation policy in last October that suggested some changes with respect to the 5/20 rule.
 
Reacting over the present 5/20 policy Ratan Tata tweeted: "The lobbying for discriminating policies between old and new airlines is reminiscent of protectionist and monopolistic pressures by vested interests and entities that seem to fear competition, as in a variety of other sectors over the years."
 
Soon he spoke to an English daily saying, "one hopes when the new policy is introduced it will be free of discrimination and protectionism, so that Indian aviation can grow for the benefit of consumer and the common man -- not to serve the interests of select beneficiaries of protectionism."
 
Amid the row, the Minister of State (MoS) for Civil Aviation Mahesh Sharma said, "no such decision has been taken,” in a written reply to NCP Member of Parliament Majeed Memon's question. Majid Menon wanted to know whether the Government is willing to remove of 5/20 rule to allow some private airlines to fly on international routes in the present draft Aviation Policy.
 
At present three private carriers -- Jet Airways, SpiceJet and IndiGo – are flying on the international routes besides the Government-owned Air India. GoAir, which is into domestic operations since 2005, has yet to qualify for the overseas operation as it is falling one short of required number of aircraft (20) of its fleet. The Tata Sons funded airlines (Air Asia and Vistara) started operations in June 2014 and January 2015 respectively and they have six and nine aircraft in their respective fleets, hence both the airlines cannot go for international operation under the 5/20 norm. The MoS Civil Aviation Sharma had reportedly said that the Government has zeroed in three to four options if 5/20 norm has to be scrapped. Top sources in the Ministry have also hinted that the Government is looking for something like 1/10, 2/10 or even 0/20 norms. “We are very close to a final decision,” Mahesh Sharma added. 
 
The FIA want a status quo on the existing regulations and has accused Ratan Tata of acting in "self-interest" and not in “national interest”. The proposal to do away with the 5/20 norm was hinted at by the erstwhile UPA government when Tata Group announced its re-entry in the domestic airlines industry in 2013. “This norm has helped in the growth of domestic market and gives a maturity period to a new airline to sustain and grow in the Indian market. This policy gives operator an ample scope to gain the confidence of the passengers,” says Harshwardhan, former chairman of the erstwhile Vayudoot Airlines. “The 5/20 rule is good and it should not be scrapped. What is the Government’s priority, domestic or international growth?” he asks.
 
Surprisingly, the official carrier Air India (AI) has a paradigm shift on its previous stand on 5/20. Now they have dropped their resistance to abolish five years and 20 aircraft norm for Indian carriers to be able to fly abroad. Air India, which is struggling to return to profitability, has reportedly conveyed to the Government in a recent meeting that it will not oppose the scrapping of the ‘5/20 rule’, a senior AI  official quipped on conditions of anonymity. Reportedly the AI told the Ministry that they will not oppose the termination of 5/20 policy if it is in the national interest and this is an external factor which will not affect the national carrier. Aviation Experts feels that this volte-face by AI will give more room to the Government to abolish the rule and in turn help Vistara and Air Asia to fly abroad.
 
 Other Experts do not find any compelling reason to scrap this rule. They say that the new airlines, who are questioning this policy, were quite aware of the 5/20 policy when they entered in the market. It is true that this kind of the rule does not exist in any other country.  But how come it will help the economy to grow if this rule is abolished? ask the experts.   
The 5/20 rule has certainly helped in the growth of the domestic connectivity. The new airlines which are against of the rule will not operate on India-Ethiopia route or India Uganda-route. They will certainly operate on the heavy traffic routes like flight to UK, USA or to the Gulf countries, the experts argue. 
 
In fact, the draft civil aviation policy has been delayed mainly due to the Government’s opaque stand over the ‘5/20 rule. The Government seems to be in a fix. The MoCA has three options — keeping the rule intact, completely doing away with it or replacing it with a credit-based system or little modification in existing rules to allow for reducing the years of experience and also the number aircraft fleet. The new airliners are giving logic that may well suit them as the Government has to set the priority to ensure better connectivity to the far flung areas whether with “rule 5/20” or without it.
 
What is 5/20 rule
 
The 5/20 rule was formulated by the UPA Government to improve connectivity by putting smaller towns of the country on the aviation map. As per this rule it is mandatory for an airline to have the five years’ experience in domestic operations and have a minimum of 20 aircraft as a prerequisite condition to get operational on international routes. 
 
But because of the 5/20 rule,  the private carriers like Jet Airways and the almost defunct airline Air Sahara also qualified and subsequently  given permission to fly on some of the international routes which are considered to be more lucrative than domestic routes marked in the RDG or Route Dispersal Guidelines.
 
SpiceJet which started its operation in 2005 got the nod to fly on international route in 2010; and IndGo which began in 2006 got the permission in 2011 for international operation. But certain routes to Gulf countries of UAE, Kuwait Bahrain Oman and Qatar were kept back exclusive for national carriers like Air India and Indian Airlines for the next three years at that time.