The Indian aviation sector has come a long way in the last 75 years and with its vast growth opportunities, sky will truly be the limit for the sector in India’s Amrutkaal.
By Ajay Sawhney
On August 15, 2022, India will complete 75 years of its independence and enter into an Amrutkaal – a 25-year long period leading up to the 100th anniversary of Indian independence. From being completely controlled by the Government of India (GoI) for nearly 40 years after independence to being liberalised in the 1990s to the subsequent introduction of public private partnership (PPP) model for the development of airports, the Indian aviation sector has undergone several structural reforms in the last 75 years.With the introduction of low cost carriers and the regional connectivity scheme of the GoI, the Indian aviation sector, which was once accessible only to a limited few, has been democratised in the last few decades and is now available to the majority of masses. The increasing demand for air travel has also translated into the number of airports growing at an extraordinary pace and this momentum is expected to get further accelerated as the GoI plans to increase the number of operational airports from 131 in 2022 to 200 by 2025.
The ascending growth of the Indian aviation sector has led to India boasting one of the largest aircraft order books in the world with pending deliveries of over 1,000 aircrafts. The high purchasing cost of an aircraft makes leasing an efficient tool for the airline operators to manage their operational costs;however, owing to the lack of a home-grown aircraft leasing industry, the Indian airline operators have had to depend entirely on foreign lessors to acquire aircrafts. In a bid to create an Atmanirbhar aircraft leasing industry, the GoI, in October 2020, permitted entities operating in the IFSC to undertake aircraft leasing and financing activities. This was followed by the issuance of a Framework for Aircraft Operating Lease by the IFSCA and the announcement of several tax exemptions for aircraft leasing and financing entities in the Union Budget 2021-22. These initiatives are indicative of the GoI’s continued commitment to support the aviation sector and its resolve to make India a global hub for aircraft leasing and financing activities.
With passenger traffic expected to surpass pre-pandemic levels by the end of this year, the recovery of the Indian aviation sector is a testament to its remarkable resilience and robustness. The ‘new normal’ ushered by the pandemic impelled the airport operators to revamp their modus operandi and give serious consideration to technologies that had earlier been overlooked to re-build the trust of the passengers. This translated into automation being integrated in operations via biometrics and facial recognition technology to create a touchless airport experience. The Ministry of Civil Aviation (MoCA) also introduced ‘DigiYatra’ for digital processing of passengers at the airports and eGCA (an e-governance platform) to automate the functioning of Directorate General of Civil Aviation. This digital flight of India’s aviation sector is expected to get further accelerated with the integration of 5G technology in the aviation ecosystem which will not only enhance the passenger experience but also augment the efficiency of airport operations.
To realise India’s commitments under the Paris Climate Agreement, the GoI should now consider giving a policy push for the uptake of sustainable aviation fuel (SAF) in aircraft operations. The SAF industry is expected to become a multi-billion dollar industry by 2028 and, with the abundant availability of SAF feedstock, India is well placed to dominate the SAF supply chain.
The Indian aviation sector has achieved several key milestones in the last 75 years and has grown exponentially to become the third largest domestic passenger market in the world. The efficiency displayed by the Ministry of Civil Aviation (MoCA) in the strategic transfer of Air India to a private player has set a benchmark, and the privatisation of airports at Delhi, Mumbai, Hyderabad and Bengaluru have set an example for the most successful PPP models for airports across the globe. The policy initiatives introduced in recent years, such as Nabh Nirman (the airport capacity augmentation scheme) and PM Gati Shakti (the multi-modal infrastructure connectivity scheme) have set the foundation for making Amrutkaal a defining period for the Indian aviation sector. With the combination of carefully crafted policies by the GoI and the synergies created through PPP, the Indian aviation sector will be a key driver of the Indian economy and a frontrunner to become a global hub for all aviation activities.
(This piece was authored by Ajay Sawhney, Partner, and Mayank Udhwani, Associate, Cyril Amarchand Mangaldas.)
