The shortage of skilled man-power is a cause for concern in most sectors in India.  Experts acknowledge that the present higher education system in India is not equipped to address this problem without some changes in the basic structure.  Official records show that the gross enrollment ratio in higher education is only 11 per cent while the National Knowledge Commission says only seven per cent of the population between the age group of 18-24 enters higher education.  Even those who have access are not ensured of quality.  Despite having over 300 universities, not a single Indian university is listed in the top 100 universities of the world. Present Regulatory framework The present system of higher education is governed by the University Grants Commission (UGC), which is the apex body responsible for coordination, determination and maintenance of standards, and release of grants.   Various professional councils are responsible for recognition of courses, promotion of professional institutions and providing grants to undergraduate programmes.  Some of the prominent councils include All India Council for Technical Education (AICTE), Medical Council of India (MCI) and the Bar Council of India (BCI).  The Central Advisory Board of Education coordinates between the centre and the states. Universities in India can be established by an Act of Parliament or state legislatures such as Delhi University, Calcutta University and Himachal Pradesh University.  Both government-aided and unaided colleges are affiliated with a university.  The central government can also declare an institution to be a deemed university based on recommendation of the University Grants Commission.  There are about 130 deemed universities and includes universities such as Indian Institute of Foreign Trade and Birla Institute of Technology.  Such universities are allowed to set their own syllabus, admission criteria and fees.  Some prominent institutions are also classified as institutions of national importance. Reforms in Higher Education There have been calls to revamp the regulatory structure, make efforts to attract talented faculty, and increase spending on education from about 4% of the Gross Domestic Product (GDP) to about 6%. Presently, the allocation for higher education is at a measly 0.7% of GDP. From time to time government appointed various expert bodies to suggest reforms in the education sector.  The two most recent recommendations were made by the National Knowledge Commission (NKC) formed in 2005 under the chairmanship of Mr Sam Pitroda and the Committee to Advise on Renovation and Rejuvenation of Higher Education, formed in 2008 under the chairmanship of Shri Yashpal.

Key Recommendations of NKC Key Recommendations of Yashpal Committee
  • Presently, India has about 350 universities.  Around 1,500 universities should be opened nationwide so that India is able to attain a gross enrolment ratio of at least 15% by 2015.
  • Existing universities should be reformed through revision of curricula at least once in three years, supplementing annual examination with internal assessment, transition to a course credit system, attract talented faculty by improving working conditions and incentives.
  • A Central Board of Undergraduate Education should be established, along with State Boards of Undergraduate Education, which would set curricula and conduct examinations for undergraduate colleges that choose to be affiliated with them.
  • An Independent Regulatory Authority for Higher Education (IRAHE) should be formed.  IRAHE should be independent of all stakeholders and be established by an Act of Parliament.
  • The UGC would focus on disbursement of grants and maintaining public institutions of higher learning.  The regulatory function of the AICTE, MCI, and BCI would be performed by IRAHE.
  • The IRAHE shall have the power to set and monitor standards, accord degree-granting power to institutions of higher education, license accreditation agencies, and settle disputes.  Same norms shall apply to all institutions irrespective of whether they are public or private, domestic or international.
  • Quality of education can be enhanced by stringent information disclosure norms, evaluation of courses by teachers and students, rethinking the issue of salary differentials within and between universities to retain talented faculty, formulating policies for entry of foreign institutions in India and the promotion of Indian institutions abroad.
  • The academic functions of all the professional bodies (such as UGC, AICTE, MCI, and BCI) should be subsumed under an apex body for higher education called the National Commission for Higher Education and Research (NCHER), formed through Constitutional amendment.
  • The professional bodies should be divested of their academic functions.  They should only be looking after the fitness of the people who wish to practice in their respective fields by conducting regular qualifying examination.
  • Establish a National Education Tribunal with powers to adjudicate on disputes among stake-holders within institutions and between institutions so as to reduce litigation in courts involving universities and higher education institutions.
  • Curricular reform should be the top-most priority of the NCHER.  It should be based on the principles of mobility within a full range of curricular areas.
  • Vocational education sector should be brought within the purview of universities.
  • NCHER should promote research in the university system through the creation of a National Research Foundation.
  • Practice of according status of deemed university be stopped till the NCHER takes a considered view on it.
  • NCHER should identify the best 1500 colleges across India and upgrade them as universities.
  • A national testing scheme for admission to the universities on the pattern of the GRE to be evolved which would be open to all the aspirants of University education, to be held more than once a year.
  • Quantum of central financial support to state-funded universities should be enhanced substantially on an incentive pattern.
Sources: The Report to the Nation, 2006-09, NKC; Yashpal Committee Report, 2009; PRS

The Draft NCHER Bill, 2010 In response to the reports, the government drafted a Bill on higher education and put it in the public domain.  The draft National Commission for Higher Education and Research Bill, 2010 seeks to establish the National Commission for Higher Education and Research whose members shall be appointed by the President on the recommendation of the selection committee (include Prime Minister, Leader of the Opposition in Lok Sabha, Speaker). The Commission shall take measures to promote autonomy of higher education and for facilitating access, inclusion and opportunities to all.  It may specify norms for grant of authorisation to a university, develop a national curriculum framework, specify requirement of academic quality for awarding a degree, specify minimum eligibility conditions for appointment of Vice Chancellors, maintain a national registry, and encourage universities to become self regulatory.  Vice Chancellors shall be appointed on the recommendation of a collegium of eminent personalities.  The national registry shall be maintained with the names of persons eligible for appointment as Vice Chancellor or head of institution of national importance.  Any person can appeal a decision of the Commission to the National Educational Tribunal. (For opinions by some experts on the Bill, click here and here.) Other Bills that are in the pipeline include The Foreign Educational Institutions (Regulation of Entry and Operation) Bill, 2010; the Central Educational Institutions (Reservation in Admission) (Amendment) Bill, 2010; and the Innovation Universities Bill, 2010.

India is one of the fastest growing aviation markets in the world.  Its domestic traffic makes up 69% of the total airline traffic in South Asia.  India’s airport capacity is expected to handle 1 billion trips annually by 2023. The Ministry of Civil Aviation is responsible for formulating national aviation policies and programmes.  Today, Lok Sabha will discuss and vote upon the budget of the Ministry of Civil Aviation. In light of this, we discuss key issues with the aviation sector in India. 

The aviation sector came under severe financial stress during the Covid-19 pandemic. After air travel was suspended in March 2020, airline operators in India reported losses worth more than Rs 19,500 crore while airports reported losses worth more than Rs 5,120 crore. However, several airline companies were under financial stress before the pandemic affected passenger travel. For instance, in the past 15 years, seventeen airlines have exited the market.  Out of those, two airlines, Air Odisha Aviation Pvt Ltd and Deccan Charters Pvt Ltd exited the market in 2020.  Air India has been reporting consistent losses over the past four years. All other major private airlines in India such as Indigo and Spice Jet faced losses in 2018-19.  

Figure 1: Operating profit/loss of major airlines in India (in Rs crore)

 image

Note: Vistara Airlines commenced operations in 2015, while Air Asia began in 2014; Negative values indicate operating loss.
Source: Unstarred Question 1812 answered on August 4, 2021, and Unstarred Question 1127 answered on September 21, 2020; Rajya Sabha; PRS.

Sale of Air India

Air India has accounted for the biggest expenditure head of the Ministry of Civil Aviation since 2011-12.  Between 2009-10 and 2020-21, the government spent Rs 1,22,542 crore on Air India through budgeted allocations.  In October 2021, the sale of Air India to Talace Ltd., which is a subsidiary of Tata Sons Pvt Ltd, was approved.  The bid for Air India was finalised at Rs 18,000 crore.  

Up to January 2020, Air India had accumulated debt worth Rs 60,000 crore.  The central government is repaying this debt in the financial year 2021-22.  After the finalisation of the sale, the government allocated roughly Rs 71,000 crore for expenses related to Air India. 

In addition to loan repayment, in 2021-22, the government will provide Air India with a fresh loan (Rs 4,500 crore) and grants (Rs 1,944 crore) to recover from the shock of Covid-19.  To pay for the medical benefits of retired employees of Air India, a recurring expense of Rs 165 crore will be borne by the central government each year.   

In 2022-23, Rs 9,260 crore is allocated towards servicing the debt of AIAHL (see Table 1). AIAHL is a Special Purpose Vehicle (SPV) formed by the government to hold the assets and liabilities of Air India while the process of its sale takes place. 

Table 1: Breakdown of expenditure on Air India (in Rs crore)

Major Head

2020-21 Actual

2021-22 RE

2022-23 BE

% change from 2021-22 RE to 2022-23 BE

Equity infusion in AIAHL

-

62,057

-

-100%

Debt servicing of AIAHL

2,184

2,217

9,260

318%

Medical benefit to retired employees

-

165

165

0%

Loans to AI

-

4,500

-

-100%

Grants for cash losses during Covid-19

-

1,944

-

-100%

Total

2,184

70,883

9,425

-87%

           

Note: BE – Budget Estimate; RE – Revised Estimate; AAI: Airports Authority of India; AIAHL – Air India Asset Holding Limited; AI – Air India. Percentage change is from RE 2021-22 to BE 2022-23. 
Source: Demands for Grants 2022-23, Ministry of Civil Aviation; PRS.

Privatisation of Airports

Airports Authority of India (AAI) is responsible for creating, upgrading, maintaining and managing civil aviation infrastructure in the country.   As on June 23, 2020, it operates and manages 137 airports in the country.   Domestic air traffic has more than doubled from around 61 million passengers in 2013-14 to around 137 million in 2019-20.  International passenger traffic has grown from 47 million in 2013-14 to around 67 million in 2019-20, registering a growth of over 6% per annum.  As a result, airports in India are witnessing rising levels of congestion.  Most major airports are operating at 85% to 120% of their handling capacity.   In response to this, the government has decided to privatise some airports to address the problem of congestion.  

AAI has leased out eight of its airports through Public Private Partnership (PPP) for operation, management and development on long term lease basis.  Six of these airports namely, Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram, and Mangaluru have been leased out to M/s Adani Enterprises Limited (AEL) for 50 years (under PPP).  The ownership of these airports remains with AAI and the operations will be back with AAI after the concession period is over.  The Standing Committee on Transport (2021) had noted that the government expects to have 24 PPP airports by 2024.  

Figure 2: Allocation towards AAI (in Rs crore)

image

Note: BE – Budget Estimate; RE – Revised Estimate; AAI – Airports Authority of India; IEBR – Internal and Extra-Budgetary Resources;
Source: Demand for Grant documents, Ministry of Civil Aviation; PRS. 

The Committee also noted a structural issue in the way airport concessions are given.  As of now, entities that bid the highest amount are given the rights to operate an airport.  This leads them to pass on the high charge to airline operators.  This system does not consider the actual cost of the services and leads to an arbitrary increase in the cost of airline operators.  The Ministry sees the role of AAI in future policy issues to include providing high quality, safe and customer-oriented airport and air navigation services.  In 2022-23, the government has allocated Rs 150 crore to AAI, which is almost ten times higher than the budget estimates of 2021-22. 

Regional Connectivity Scheme (RCS-UDAN)

The top 15 airports in the country account for about 83% of the total passenger traffic.  These airports are also close to their saturation limit, and hence the Ministry notes that there is a need to add more Tier-II and Tier-III cities to the aviation network.  The Regional Connectivity Scheme was introduced in 2016 to stimulate regional air connectivity and make air travel affordable to the masses.  The budget for this scheme is Rs 4,500 crore over five years from 2016-17 to 2021-22.   As of December 16, 2021, 46% of this amount has been released.  In 2022-23, the scheme has been allocated Rs 601 crore, which is 60% lower than the revised estimates of 2021-22 (Rs 994 crore).  

Under the scheme, airline operators are incentivised to operate on under-served routes by providing them with viability gap funding and airport fee waivers.  AAI, which is the implementing agency of this scheme, has sanctioned 948 routes to boost regional connectivity.  As of January 31, 2022, 43% of these routes have been operationalised.  As per the Ministry, lack of availability of land and creation of regional infrastructure has led to delays in the scheme.  Issues with obtaining licenses and unsustainable operation of awarded routes also contribute to the delay.  As per the Ministry, these issues, along with the setback faced due to the pandemic acted as major obstacles for the effective utilisation of funds.

Figure 3: Expenditure on Regional Connectivity Scheme (in Rs crore)

image
 Note: BE – Budget Estimate; RE – Revised Estimate; 
 Source: Demand for Grants documents, Ministry of Civil Aviation; PRS.

Potential of air cargo 

The Standing Committee on Transport (2021) had noted India’s cargo industry’s huge potential with respect to its geographical location, its growing economy, and its growth in domestic and international trade in the last decade.  In 2019-20, all Indian airports together handled 3.33 million metric tonnes (MMT) of freight.  This is much lower than the cargo handled by Hong Kong (4.5 MMT), Memphis (4.8 MMT), and Shanghai (3.7 MMT), which are the top three airports in terms of the volume of freight handled.  The Standing Committee on Transport (2021) has noted inadequate infrastructure as a major bottleneck in developing the country’s air cargo sector.  To reduce such bottleneck, it recommended the Ministry to establish dedicated cargo airports, and automate air cargo procedures and information systems to streamline redundant processes.   

The Committee has also highlighted that the Open Sky Policy enables foreign cargo carriers to freely operate cargo services to and from any airports in India having customs/immigration facilities.  They account for 90-95% of the total international cargo carried to and from the country.  On the other hand, Indian air cargo operators face discriminatory practices and regulatory impediments for operating international cargo flights in foreign countries.  The Committee urged the Ministry to provide a level-playing field for Indian air cargo operators and to ensure equal opportunities for them.  The Ministry revised the Open Sky Policy in December 2020.   Under the revised policy, the operations of foreign ad hoc and pure non-scheduled freighter charter service flights have been restricted to six airports - Bengaluru, Chennai, Delhi, Kolkata, Hyderabad, and Mumbai. 

Rising cost of Aviation Turbine Fuel

The cost of Aviation Turbine Fuel (ATF) forms around 40% of the total operating cost of airlines and impacts their financial viability.  ATF prices have been consistently rising over the past years, placing stress on the balance sheets of airline companies.  As per recent news reports, airfares are expected to rise as the conflict between Russia and Ukraine is making ATF costlier.

ATF attracts VAT which is variable across states and does not have a provision for input tax credit.  High rates of aviation fuel coupled with high VAT rates are adversely affecting airline companies.

Table 2: Expenditure on ATF by airlines over the years (in Rs crore)

Year

National Carriers

Private Domestic Airlines

2016-17

         7,286 

       10,506 

2017-18

         8,563 

       13,596 

2018-19

       11,788 

       20,662 

2019-20

       11,103 

       23,354 

2020-21

         3,047 

         7,452 

Source: Unstarred Question 2581, Rajya Sabha; PRS. 

The Ministry, in January 2020,  has reduced the tax burden on ATF by eliminating fuel throughput charges that were levied by airport operators at all airports across India.  Central excise on ATF was reduced from 14% to 11% w.e.f. October 11, 2018.  State governments have also reduced VAT/Sales Tax on ATF drawn on RCS airports to 1% or less for 10 years.  For non-RCS-UDAN operations, various state governments have reduced VAT/Sales Tax on ATF to within 5%.  The Standing Committee on Transport (2021) has recommended ATF to be included within the ambit of GST and that applicable GST should not exceed 12% on ATF with full Input Tax Credit. 

For more details, please refer to the Demand for Grants Analysis of the Ministry of Civil Aviation, 2022-23.