On September 14, 2012, the central government announced that foreign airlines would now be allowed to invest up to 49% in domestic airlines. Under the policy announced by the government, the ceiling of 49% foreign investment includes foreign direct investment and foreign institutional investment. Prior to investing in a domestic airline, foreign airlines would have to take approval of the Foreign Investment Promotion Board. Additionally, the applicant will also be required to seek security clearance from the Home Ministry. In 2000, the government first permitted foreign direct investment up to 40% in the domestic airline sector. However, no foreign airline was allowed to invest either directly or indirectly in the domestic airlines industry. Non Resident Indians were permitted to invest up to 100%. Furthermore, the foreign investor was required to take prior approval of the government before making the investment. Subsequently, the central government eased the foreign investment norms in this sector. As of April 2012, foreign direct investment is permitted in all civil aviation sectors. The Civil Aviation sector in India includes airports, scheduled and non-scheduled domestic passenger airlines, helicopter services / seaplane services, ground handling Services, maintenance and repair organizations, flying training institutes, and technical training institutions. Foreign airlines were not permitted to invest either directly or indirectly in domestic passenger airlines. However, they are permitted to invest in cargo companies and helicopter companies. Investment by foreign airlines in the domestic airline industry has been a long standing demand of domestic airlines. According to the Report of the Working Group on Civil Aviation for formulation of twelfth five year plan (2012-17), India is currently the 9th largest civil aviation market in the world. Between 2008 and 2011, passenger traffic (domestic and international) and freight traffic increased by a compounded annual growth rate of 7% and 11% respectively. The traffic growth (passenger and freight) at 18% exceeded the growth rate seen in China (9.7%) and Brazil (7.5%), and was higher than the global growth rate of 3.8%. According to the Centre for Civil Aviation, until February 2012, India had the second highest domestic air traffic growth. However, due to the crisis faced by Air India and Kingfisher, the passenger numbers have declined in June-July 2012. India was the only major domestic market that failed to show an expansion in demand in June 2012, as compared to the previous year. Despite the rapid growth, the financial performance of airlines in India has been poor. According to the Report of the Working Group on Civil Aviation, the industry is expected to have a debt burden of approximately USD 20 billion in 2011-2012. According to the same report, during the period 2007-2010 India's airlines suffered an accumulated loss of Rs 26,000 crores. According to the government, investment by foreign airlines shall bring in the much needed funds and expertise required by the domestic industry. However, as per to some analysts, foreign investment alone cannot solve the problem. According to them, the major cost impacting the growth of the industry is the high cost of Aviation Turbine Fuel. As per the press release by the government on June 6, 2012, ATF accounts for 40% of the operating cost of Indian carriers. In comparison, fuel constitutes only 20% of the cost for international carriers. ATF in India is priced, on an average, 60% higher than international prices. This is due to the high rate of taxation imposed on ATF by some states. In most states, the VAT on ATF is around 25-30%.
In recent news reports there have been deliberations on whether there is a possibility of appealing a central government decision on forest clearances. In this context, the National Green Tribunal (NGT) has directed states to comply with the statutory requirement of passing an order notifying diversion of forest land for non-forest purposes. It has also held that it can hear appeals from the orders of state governments and other authorities on forest clearances. The NGT was established in 2010 to deal with cases relating to environmental protection, and conservation of forests and other natural resources. The need was felt to have a mechanism to hear appeals filed by aggrieved citizens against government orders on forest clearances. For instance, the NGT can hear appeals against an order of the appellate authority, state government or pollution control board under the Water (Prevention and Control of Pollution) Act, 1974. How is a forest clearance obtained? Obtaining a forest clearance is a key step in the process of setting up a project. Recently the Chhatrasal coal mine allotted to Reliance Power's 4,000 MW Sasan thermal power project in Madhya Pradesh has received forest clearance. The Ministry of Environment and Forests (MoEF) first gives ‘in-principle’ approval to divert forest land for non-forest purposes based on the recommendations of the Forest Advisory Committee. This approval is subject to the project developer complying with certain conditions. Once these conditions are complied with, the central government issues the final clearance. It is only after this clearance that the state government passes an order notifying the diversion of forest land. The NGT’s decision deals with this point in the process during which an appeal can be filed against the order of forest clearance. For the flowchart put out by the MoEF on the procedure for obtaining a forest clearance, see here. What was the NGT’s ruling on forest clearances? The NGT was hearing an appeal against a forest clearance given by the MoEF to divert 61 hectares of forest land for a hydroelectric project by GMR in Uttarakhand. The NGT has ruled that it does not have the jurisdiction to hear appeals against forest clearances given to projects by the MoEF. However, the NGT has the power to hear appeals on an order or decision made by a state government or other authorities under the Forest (Conservation) Act, 1980. The judgment observed that though Section 2 of the Forest (Conservation) Act, 1980 requires that state governments pass separate orders notifying the diversion of land, this requirement is not being followed. The NGT has directed that state governments pass a reasoned order notifying the diversion of the forest land for non-forest purposes, immediately after the central government has given its clearance. This will allow aggrieved citizens to challenge the forest clearance of a project after the state government has passed an order. Additionally, the NGT has also directed the MoEF to issue a notification streamlining the procedure to be adopted by state governments and other authorities for passing orders granting forest clearance under section 2 of the Forest (Conservation) Act, 1980. There are some concerns that an appeal to the NGT can only be made after the state government has passed an order notifying the diversion of forest land and significant resources have been invested in the project. What is the status of applications for forest clearances made to the MoEF? The MoEF has given approval to 1126 proposals that involve the diversion of 15,639 hectares of forest land from July 13, 2011 to July 12, 2012. The category of projects accorded the most number of approvals was road projects (308) followed by transmission lines (137). Some of the other categories of projects that received clearance for a significant number of projects were mining, hydel and irrigation projects. However, most land was diverted for mining related projects i.e., 40% of the total forest land diverted in this period. Figure 1 shows a break up of the extent of forest land diverted for various categories of projects. The number of forest clearances pending for decision by the MoEF for applications made in the years 2012, 2011 and 2010 are 197, 129 and 48 respectively. [i]
Source: “Environmental Clearance accorded from 13.07.2011 to 12.07.2012”, October 12, 2012, MoEF.
[1] MoEF, Rajya Sabha, Unstarred Question no. 2520, September 4, 2012
