Indian aviation sector has potential to be number one by 2030

Written by FE Online | Mumbai | Updated: Mar 13 2014, 22:46pm hrs
India has the potential to become the third largest aviation market by 2020 and the largest by 2030. There is large untapped potential for growth due to the fact that access to aviation is still a dream for nearly 99.5 per cent of its population, indicates the FICCI-KPMG 'India Aviation 2014-Enhancing Air Connectivity' report launched at the civil aviation exposition in Hyderabad.

According to the report, the Indian civil aviation industry is on a high growth trajectory, albeit with minor hiccups. The industry has ushered in a new wave of expansion driven by Low Cost Carriers (LCC), modern airports, Foreign Direct Investments (FDI) in domestic airlines, cutting edge Information Technology (IT) interventions and a growing emphasis on No-Frills Airports (NFA) and regional connectivity. The Indian civil aviation industry is amongst the top 10 in the world with a size of around US$ 16 billion.

Sidharth Birla, president, FICCI, said, "In view of the enormous growth prospects of air traffic and substantial investment projections, Indian aviation market offers significant long term opportunities for global aviation players. Indian Government and industry are already working together closely. I am confident, this partnership will be further strengthened and play a critical role in improving regional connectivity and promoting sustainable development of the civil aviation sector in the country."

The report notes that the next generation of aviation growth in India will be triggered by regional airports. At present, there are around 450 used, un-used and abandoned airports and airstrips spread all over the country. Many Indian states, especially in Eastern India, have started taking pro-active measures to promote air connectivity. These initiatives include reduction in sales tax on ATF, development of no-frills airports, promotion of aviation academies and supportive policies for airlines and tourism. West Bengal deserves a special mention as it is the first large state in the country to declare zero per cent sales tax on ATF at its regional airports and 15 per cent sales tax on ATF used by additional flights started at its metro airport in Kolkata.

A lot more needs to be done, as several Tier II/III cities are still unconnected or underserved. These involve relaxation on regulations, revising the security requirements, allowing domestic code sharing, providing free or discounted utilities and connecting infrastructure. The proposed Essential Air Services Fund (EASF) by Ministry of Civil Aviation (MoCA) needs to be set up immediately. All this will have a multiplier effect in terms of higher growth of local economic activities, tourism and employment.

Amber Dubey, partner and head of Aerospace and Defense, India, global consultancy KPMG, said, "India is blessed with a great geographic location, a large upwardly mobile middle class and immense tourism opportunities. We have just touched the tip of the aviation iceberg. The beauty is that our challenges are primarily related to policies, procedures, regulations and taxes. These are all man-made problems and hence surmountable. The central government and the eastern states have brought in many reforms in the aviation policy, procedures and taxation. We hope this trend continues."