As this week was about to end, the government announced significant news on September 18 for the domestic aviation industry. The government has permitted domestic airlines to deploy 85 percent of their approved flights capacity with immediate effect as the air traffic continues to rise steadily. This limit was so far capped at 72.5 percent.
In addition, the government has also permitted fare bands to be rolled over for a period of 15 days. Hence, at any given time, fare bands will be valid for a period of 15 days only. For instance, if the current date is September 20, then fares will be restricted at a minimum and maximum level until October 4 but fare bands won’t be applicable from October 5 onwards.
For context, the government has capped fares and domestic fights deployment by airlines since May 2020 due to the demand uncertainty as a result of the COVID-19 pandemic.
The week was also impressive as it indicates that two decades and two attempts later, the government may finally be able to sell Air India. On September 15, the deadline for submission of financial bids for Air India ended and it ended on a good note! The government has announced that it has received "financial bids" for Air India and the process has now moved to the concluding stage.
The most popular contender for Air India is the Tata Group. Life will come a full circle for Air India in case the Tatas are able to succeed in the concluding stage as it was JRD Tata who founded Air India, then called Tata Airlines, in 1932. Tata Airlines was renamed as Air India when it became a public limited company in 1946. In fact, JRD Tata was at the helm of Air India as Chairman until 1978 and even Ratan Tata was the Chairman of Air India from 1986 to 1989.
Tatas were also the potential bidders when the government tried to sell a stake in Air India in 2001 and 2017. So, in a nutshell, Tatas will have four airlines under their umbrella if they become successful bidders. These will be Air India, Vistara, Air India Express and AirAsia India. Industry experts believe that there is expected to be a combination of synergies between Air India and Vistara and between AirAsia India and Air India Express if Tatas become the new owners of Air India but we will have to wait for the divestment process to get more clarity on the subject.
Sources indicate that in addition to Tata Group, SpiceJet Chairman and Managing Director Ajay Singh has also submitted a financial bid in his personal capacity for the airline. The permutations and combinations in case Singh, the promoter of low-cost carrier SpiceJet, succeeds in the bid process remains unknown.
In an exclusive interaction with CNBC-TV18 on Sep 17, Civil Aviation Secretary Pradeep Singh Kharola had said that the technical bids will now be evaluated and further decisions will be based on its outcome.
The week was also significant as the government announced performance-linked incentives for the drone industry. Under this, the government has allocated Rs 120 crore spread over three financial years for the PLI scheme for drones and drone components.
The proposed tenure of the PLI scheme is three years starting in FY 2021-22. The PLI scheme will be extended or redrafted after studying its impact in consultation with the industry.
The drone industry in India is still at a nascent stage and that can be ascertained from the fact that the proposed PLI allocation is nearly double the combined turnover of all domestic drone manufacturers in FY 2020-21.
The incentive for a manufacturer of drones and drone components shall be as high as 20 percent of the value addition made by her, the government said. The value addition shall be calculated as the annual sales revenue from drones and drone components (net of GST) minus the purchase cost (net of GST) of drone and drone components.
"The government has agreed to keep the PLI rate constant at 20 percent for all three years, an exceptional treatment given only to the drone industry. In PLI schemes for other sectors, the PLI rate reduces every year,” the Civil Aviation Ministry has said.
In addition to the drones PLI, there is more good news for the drone industry as the Digi Sky platform for drones is expected to go live by September 24.
First Published: IST