Naresh Chandra Committee Report on the Civil Aviation Sector

The Naresh Chandra Committee submitted its report to the Ministry of Civil Aviation on December 8, 2003, suggesting dramatic changes to revitalize the Indian civil aviation sector focusing on privatization, encouraging foreign investment, affordability, viability and safety.

Some Recommendations of the Committee

• Foreign equity investment for foreign individuals and companies pertaining to both domestic and international scheduled air transport services should be further liberalized to allow upto 49 percent. In all other air services, i.e., non-scheduled services such as helicopter operations, foreign investment, including investment by foreign airlines, should be allowed upto 100 percent.
• Liberalization of the international air transport segment to be pursued in a phased manner.
• Immediate measures to reduce system costs of the civil aviation sector, including allowing airlines to source Aviation Turbine Fuel (“ATF”) from the supplier of their choice, improving co-ordination with other ministries such as home affairs and defence.
• Airport charges to be brought down to rates comparable with neighboring South East Asian states and Gulf countries.
• Lower excise duty and sales tax on ATF and abolish import duty and sales tax on AVGAS (fuel for trainer aircraft at flying clubs).
• Other aviation related taxes and fees such as Inland Air Travel Tax, Foreign Travel Tax and Passenger Service Fee maybe replaced with a single lower ad valorem sector-specific cess, at 5 percent of the airfare.
• Liberalized airports should be allowed to come up irrespective of proximity to existing airports.
• Abolition of route dispersal guidelines in the domestic travel segment. Simultaneously the government should set up a non-lapsable Essential Air Services Fund to provide explicit subsidy support, congruent with the quantum of funds available, to essential but uneconomical services, including commercially unviable airports.
• Privatization of the national carriers - Indian Airlines and Air India - along with the airports in India.
• Privatisation of existing airports and private sector participation in Greenfield projects.
• Due to increased privatization and the potential abuse of monopoly power by the airport operators, the responsibility of ensuring appropriate levels of regulation should be vested with the proposed Aviation Economic Regulatory Authority (“AERA”).
• Safety regulation of Air Traffic Control Corporation (“ATC Corporation”) should be under the purview of the Directorate General of Civil Aviation.