Regulatory and Tax Regime is Denying 'Achhe Din'

By following a difficult, stern and archaic regulatory and tax regime, the government is only discouraging industrialists from owning these resources by laying out a series of hurdles for their operation

Early this year, when news of Supertech’s Cessna Citation Jet being stranded on ground for over six months due to paperwork appeared, it not only exposed the Directorate General of Civil Aviation’s (DGCA) snail paced approach at processing and finalising permits, but also the unreasonable regulatory and tax policies that exist. In Supertech’s case the paperwork related to CAP 3100, a certification system necessitated by the DGCA that outlines the procedure to obtain an air operator’s permit.

The notoriously long time taken by the DGCA in issuing the permit is what likely dissuades many international investment opportunities from transpiring beyond the feasibility meetings. The outcome of the breakfast meeting between the Boeing CEO and the Prime Minister on September 29 of last year or multiple ‘pro business environment’ statements being issued by him over foreign soils will be closely followed by aviation enthusiasts who will be disappointed if the state of the prevailing aviation regulatory and tax environment does not change to promote business interest.

Different Regulatory Standards from Rest of the World

Businesses affected by such long delays could only voice their frustration to empty ears and hope for the advent of what the forecasts predicted to be ‘Achhe Din’ (good days) under the Modi Government. However, with aircraft still on ground, most of them are still waiting for the realisation of the words in the Prime Minister’s speech prompting for competing with world powers and integrating standards to that of global practices. To compare, the aviation regulatory bodies in America or Europe take only one month from the time of an aircraft’s procurement to clear it for operation. The DGCA, although claims to take upto three months, but invariably takes six months for the same job.

Pilot licensing

Another example of differences in world standard exists in that of pilot licensing and privileges. World over, an experienced pilot starts flying as a captain on a machine not previously endorsed on his licence after undergoing simulator training. However, in India, the pilot is required to fly a further 100 hours with a supervisor before he can fly the new aircraft as captain. As a result, Indian companies recruit foreign pilots, who, by virtue of worldwide practice, would have begun flying as captain immediately after their simulator training and thereby gained experience faster and at a competitively earlier phase in their career. Recruiting foreign pilots when thousands of Indian pilots sit unemployed, is a shameful state which does not carry adequate justification. Moreover, since foreign pilots are governed by their home regulatory body, they are not required to comply with the ‘100 hours of actual flying under supervision’ clause even though they regularly operate within Indian airspace. These contradictory mandates under which pilots fly lack concrete reasons.

World over, pilots undergo ‘proficiency checks’ once in a year; Indian pilots undergo checks twice in a year. World over, route checks are not conducted for non-scheduled or on demand charter flights; Indian pilots have to undergo route checks on the aircraft, every year. Likewise, there are innumerable requirements/restrictions imposed on Indian pilots which are not applicable in other countries. If one were to press any regulatory official for a reason, it would not be surprising to hear ‘Indian conditions’ as the prompt response. As for what these ‘conditions’ are, the question is left unanswered. Unless one were to know the conditions leading to the formulation of strict rules, how would one know when these conditions would cease to exist?

This lack of clarification results in escalating costs, grounded aircraft, experienced pilots becoming deficient, and an abundance of newly trained and jobless co-pilots.

Support to ‘bring in change’, by some officials at DGCA, often gets drowned amidst the bogey of ‘Flight Safety’ or ‘File Movement’. These are the two mantras widely used by non-progressive and over-cautious officials to snub those officials who are prepared to work-with the industry in bringing about the much needed change. Unless this mindset is addressed, there is very little that could change at DGCA.

Tax Hurdles

The Ministry of Finance, in the year 2007, in an inexplicable move, increased the customs duty on private aircraft from nil to 20 per cent. As a result, industrialists, who had brought in aircraft for private use for themselves and their company officials immediately reapplied for commercial licences. The load on DGCA multiplied as the oversight requirements increased manifold. The result was that DGCA became overstretched and was ultimately downgraded by FAA. Once again, more costs, grounded aircraft, a false perception of Indian aircraft being unsafe and related effects discouraged foreign investment. Few Indian industrialists even chose to buy their private airplanes under foreign registry. Business aviation, which was forecasted to grow exponentially, slumped into recession.

Way Forward

Business aviation contributes to the growth of cities and mankind as it promotes industry, tourism, lifesaving medical flights, etc. By following a difficult, stern and archaic regulatory and tax regime, the government is only discouraging industrialists from owning these resources by laying out a series of hurdles for their operation. Instead, they need to be encouraged to invest further and bring in more aircraft that serve as assets of national importance.

The DGCA/Ministry of Civil Aviation need to answer as to why a new aircraft needs to be grounded for months, why Indian rules/ regulations are not in sync with world standard practices. Likewise, the Finance Ministry needs to be questioned on how much revenue they have earned by increasing custom duties on business aviation aircraft vis-à-vis the resultant retarded growth of this sector and nation.

A revolutionary push to change the regulatory and tax policies which have together been perhaps the only impediment to the growth of this industry is required. There is a need to understand that civil aviation is not for the rich but for everybody as growth of civil aviation will bolster growth of all other industries.

The new draft National Civil Aviation Policy has addressed many of the hurdles mentioned above. It has some flaws which hopefully will be addressed before finalisation. The issue of complete roll back of ‘custom duty’ on business aviation operators is the most important omission which hopefully will get included before the policy is issued. Execution by the way of change of mindset, of DGCA being a facilitator and not a regulator, is what the industry and the nation needs.

Remember, ‘The Railways brought in industrialisation in the country. Civil aviation can bring in economic supremacy.’