Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget 2024-25 today following the tabling of the Economic Survey. This marks the first budget of Prime Minister Narendra Modi’s third term and is expected to put the spotlight on the aviation industry. India, now the world’s third-largest aviation market after the US and China, saw daily domestic flights increase to 4.2 lakh in the financial year 2023-24 from 1.85 lakh in 2014. Despite robust growth, concerns persist over the sector’s profitability.
India now 3rd-largest domestic airline market
According to analysis using OAG data, India has risen to become the world’s third-largest domestic airline market, marking a significant advancement from its fifth position a decade ago. The data shows that India’s domestic airline capacity has doubled over the past decade, increasing from 7.9 million in April 2014 to 15.5 million in April 2024. By moving to the third position, India has exceeded Brazil, now placed fourth with 9.7 million seats, and Indonesia, which has fallen to fifth with 9.2 million seats. The United States (86.1 million) and China (67.8 million) continue to lead as the top two countries in terms of domestic airline capacity.
Aviation sector aims to enhance infrastructure
The aviation sector aims to enhance infrastructure by expanding airports and modernizing existing facilities to improve connectivity across the country, particularly to Tier-II and Tier-III cities through initiatives like RCS-UDAN.
Sustainability in focus
Sustainability remains a key focus, with efforts directed towards implementing environmentally responsible practices and achieving carbon accreditation for airports to reduce carbon footprints. Collaboration among government entities, industry stakeholders, and international partners is promoted to address sector-specific challenges and capitalise on opportunities for sustainable growth and development.
Need for regulatory frameworks
Regulatory frameworks are being reviewed and streamlined to ensure operational efficiency and alignment with international aviation standards, enhancing safety and compliance. Managing operational costs, including fluctuating fuel prices and other expenses, is critical, prompting discussions on potential financial aids or incentives to support airlines amidst economic challenges.
Technology innovation
Innovation in technology and services is encouraged to enhance passenger experience and operational efficiency, with investments in research and development in aviation-related technologies. The aviation sector seeks favorable fiscal policies and adequate funding for critical programs like UDAN and regulatory bodies to stimulate growth and investment.
What did Interim Budget entail for Aviation sector?
Finance Minister Nirmala Sitharaman in her interim budget speech on February 1, 2024 highlighted significant advancements in India’s aviation sector, including the expansion of airports to 149, introduction of 517 new air routes, and an anticipated increase to 1.3 crore flyers. Sitharaman also noted record aircraft orders exceeding 1,000, underscoring a decade of dynamic growth that has energized the aviation industry.
“The number of airports has doubled to 149, adding that Indian carriers have pro-actively placed orders for over 1,000 new aircraft,” Sitharaman said. “Roll out of air connectivity to tier-two and tier-three cities under UDAN scheme has been widespread. Five hundred and seventeen new routes are carrying 1.3 crore passengers,” the Finance Minister added.
Civil aviation ministry faced budget cut in interim budget
The budgetary allocation for the civil aviation ministry has been reduced to Rs 2,300 crore for the upcoming financial year. This is down from Rs 2,922.12 crore in the revised estimate for the current fiscal year ending March 2024. According to documents from the interim Budget for 2024-25, this allocation includes a revenue component of Rs 2,257.79 crore.
DGCA, BCAS funds was reduced in interim budget
The Budget document also shows reduced allocations for regulators DGCA (Directorate General of Civil Aviation) and BCAS (Bureau of Civil Aviation Security) in 2024-25. DGCA is allocated Rs 302.64 crore, while BCAS will receive Rs 89 crore. In contrast, the revised estimates for 2023-24 allocated Rs 397.55 crore for DGCA and Rs 100.02 crore for BCAS.
60% cut in allocation for regional air connectivity scheme in interim budget
The budget allocation for the regional connectivity scheme UDAN (Ude Desh Ka Aam Nagrik) has been slashed by 60% from its previous record-high grant. This fund is aimed at revitalizing unused and underused airports in tier-2 and tier-3 cities. The government has earmarked Rs 502 crore for the scheme, a significant reduction from the previous Budget Estimate (BE) of Rs 1,244 crore, which was the highest-ever allocation since its inception in 2017.