| This month, PRS Legislative Research is 5 years old! The objective when we started out was to make the legislative process in India better informed, more transparent and participatory. From what started off as an idea, we believe we have made some progress towards our objective. - About 250 MPs across political parties have reached out to PRS for inputs on a range of issues that have come up in Parliament. In addition, there are a number of MPs who use PRS material for their preparation in Parliament, even though they have not contacted PRS for further inputs. - PRS has increasingly become a resource for the media as well. Over the past year, PRS has been cited on nearly 400 occasions by leading newspapers and websites as the source of information about legislation and Parliament. These are some of the milestones that we feel happy to have reached. But I want to really share are some of the learnings that we have had over these years. The first thing that we have learned is that many of us carry so many wrong perceptions about our MPs. Most of us don’t know that more than 80 percent of our MPs have college degrees. Most of us don’t know that the average attendance rate in Parliament is close to 80 percent in the past year. Most of us don’t know that Parliament has worked for more than 90 percent of the scheduled time in recent sessions, despite the undesirable disruptions in Parliament. There is a lot that is wrong with our politics, but we hope that some of these facts throw light about some lesser known aspects about our MPs. Laws are made for the really long term! That seems obvious, when we see examples such as our Indian Penal Code which was made in 1860, and the Land Acquisition Act that has haunted our country in recent years was passed in 1894. And these are just some examples. The fact is that if we do not debate our laws when they are being made, and citizens do not engage and provide inputs to this process, then we will be stuck with any issues that these laws might have for the next 100 years or more. So it is critical to get the laws as close to ‘right’ as possible when they are being passed. It is not obvious to most people that so many MPs put in significant effort to engage effectively in Parliament. Clearly, there is a selection bias, statistically speaking – I am talking of MPs who have reached out to us. Despite this selection bias, the point is that there are a number of MPs who take their work in Parliament seriously, even though they know that much of the work they do in Parliament has almost no bearing on their re-election prospects. (By the way, in most informal polls that I have done when I meet with groups of people, most do not know the role of an MP – even amongst some of the well educated groups.) Why do so many MPs still work hard to prepare for their work in Parliament, despite knowing that this work has no bearing on their re-election prospects? On this, we can only hypothesize. There are many MPs who understand their role as legislators and take it very seriously. There are MPs who feel that making a good point on an issue on the floor of Parliament is a way to establish their grasp of a certain issue to their colleagues in Parliament, but also to the larger world. For some others, it is a signalling device to their party colleagues about their interest and expertise in a certain subject area. And we have had MPs who have said, that they feel very good when other MPs, especially from other parties, compliment them for making a good point. All of these sound like good positive reasons for many MPs to want to be well prepared to speak in Parliament. We have begun to appreciate that the role of the MP in Parliament is very challenging. I can point to at least three reasons, which are independent of how educated or capable an MP might be: (a) The range of subjects in Parliament is so wide that no individual, however intelligent, can be fully conversant with all the subjects being discussed. (b) MPs have no research staff whatsoever, and are expected to do all of their preparatory work on their own, and (c) The constituency pressure on the MPs is often very high, making it difficult for them to pay adequate attention to their work in Parliament. We most certainly want more from our MPs and our Parliament. We want our MPs to meet for more days, find better ways to raise issues in Parliament than to disrupt proceedings, debate in more detail the laws that they pass. But what we have learned is that we cannot throw the baby out with the bath water. So, I am not suggesting that we can’t do better or that our MPs or our Parliament are perfect. The only way we will have a better Parliament is if we engage. And more people engage – from all walks of life. Policy making is not the exclusive preserve of either the expert or the policy maker. The policy process can be greatly strengthened if we participate in the process and ensure that our MPs know that we want effective laws to govern us and our children. Parliament can be made more effective by addressing some of the current bottlenecks. And some of these issues are not even difficult to fix. For example, can we have more people in the committee staff to support the work of the standing committees in Parliament so they can cover more ground in any given year? Can we have qualified research staff working for MPs so that they can go better prepared for Parliament? (Our Legislative Assistants to MPs – LAMPs programme has shown that it is hugely rewarding for young legislative assistants and the MPs if such a platform is created.) Can we have recorded voting on all legislative votes, instead of voice votes – the electronic button system is already in place to do this! These are just some examples… and we at PRS have a laundry list of ideas for strengthening Parliament – with varying degrees of difficulty. We have raised some of these issues in our Annual Conference of Effective Legislatures, and will continue to do so in the years ahead. A very BIG thanks to each of you for making PRS possible over these past five years… We hope that you will continue to bless and support us in the years ahead to help shape a more robust policy making process in India. | PRS PRODUCTS The Legislative Briefs are our flagship product. Each Brief analyses one Bill pending in Parliament. These are no longer than 6 pages and are sent to all MPs. We then get calls from MPs asking for more information/ clarification. Since earlier this year PRS has begun a Wednesday morning Policy Dialogue series exclusively for MPs. These are widely attended by MPs across parties. PRS is the knowledge partner to brief MPs in the Thursday morning Bill briefing sessions organised by the Constitution Club. PRS has reached out to about 1000 journalists across the country, through journalist workshops and direct engagement. PRS has started the Legislative Assistants to MPs (LAMPs) programme as a pilot initiative. Under the programme, participating MPs get a trained legislative assistant for a period of three Parliament sessions. PRS produces Primers to demystify Parliamentary process for citizens. These are widely used in our interactions with civil society groups. The Vital Stats series is a crisp two page document that often highlights interesting aspects of Parliament. They are very popular with journalists. PRS has nearly 1000 fans on Facebook and 2000 followers on Twitter, including some MPs. PRS has a Session Alert at the beginning of each session of Parliament. On the last day of each session, PRS releases two reports on the just concluded session: Parliament Session Wrap and Plan vs. Performance. PRS hosts an Annual Conference of Effective Legislatures each year to highlight certain aspects of the functioning of Parliament. PRS has compiled a free online database of all state laws across the country. This effort www.lawsofindia.org is the first effort of its kind in India. The PRS website www.prsindia.org has become an important resource for anyone tracking the Indian Parliament both within the country and abroad. |
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)
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)
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)
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.
