The objective of this blog is to supplement the information provided on the PRS website, with more analysis, information, that might be useful for readers. We expect to discuss issues about legislation and policy on some occasions and about the functioning of Parliament at other times. Interesting Parliament trivia will also find their place on the blog from time to time. The Parliament itself puts up significant amount of information on its website, making it relatively easy for anyone tracking the institution to access data. But what we at PRS have tried to do is to add value to the information that we have accessed from Parliament, and make our products even more relevant to users. We hope readers of this blog will share their views with us on a range of issues. We know that a number of people both in India and abroad use our website as a resource on legislation and Parliament. Our somewhat tentative beginning on Twitter (www.twitter.com/prslegislative) is now being followed more widely. Recent updates from Twitter will also be displayed on the Blog. The only way in which our legislation will become better over time is when lots of people like us scrutinise issues in detail, engage with our law makers and ensure that the process takes into account the inputs of citizens from across the country. As we prepare ourselves for the upcoming Budget session of Parliament, we expect to post on our blog quite regularly. We hope you will find this useful in the weeks and months ahead! Please spread the word about this new blog, and thank you for all your continued support.
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%.
