At 37, Ram Mohan Naidu is the youngest minister in the Union cabinet. The first-time minister is helming India's burgeoning civil aviation sector which, however, has almost become a duopoly between IndiGo and Air India. In a conversation with Vinay Pandey at ET India Ascends event on Wednesday, Naidu said he doesn't want to encourage a duopoly and intends to make it easier for airlines to start business in the country. Edited excerpts:
A brief overview of the sector's progress under the current government...
Over the past decade, we've seen unprecedented growth in civil aviation. When Prime Minister Narendra Modi took office in 2014, we had only 74 airports. Today, that number has risen to 157. No other country has added 83 airports in such a short span... The number of daily air passengers has also doubled, from around 20 million in 2014 to over 40 million, with 500,000 passengers flying daily. This puts us right behind the US. Additionally, our aircraft fleet has grown from 400 in 2014 to more than 800, with another 1,500 aircraft on order. This growth is not just about infrastructure but also job creation and connectivity.
On plans to capitalise on this growth, in terms of job creation...
Our focus is not only on expanding infrastructure but also on boosting the maintenance, repair, and overhaul (MRO) sector. Right now, 95% of engine maintenance is done abroad, but we are working to bring this expertise to India. This will benefit our youth by creating jobs and allowing skilled engineers to work domestically. Policy changes, such as a uniform 5% GST on MRO components and extending the warranty on MRO services from three year to five, have made India attractive for aviation maintenance. Before, MRO components faced varying GST rates-5%, 12%, 18%, or higher- making it hard for businesses to thrive. Now, with a single 5% GST rate, we're creating a stable environment for growth. By extending the import timeframe for MRO parts to one year, we're ensuring operational flexibility.
On moves to keep air travel affordable and connected to far flung areas...
Through the UDAN (Ude Desh ka Aam Naagrik) scheme, we've improved connectivity to underserved and unserved airports across India. This scheme provides financial support to airlines on routes that may not be commercially viable otherwise. As a result, 600 routes have been launched and over 120 are fully operational today. By lowering costs and increasing route options, we're enabling travellers from tier-2 and tier-3 cities to fly affordably.
On ensuring fair pricing in an effective duopoly...
We monitor airfare trends closely. When we see unusual price fluctuations, we engage with airlines to keep rates in check. And we want more airlines to come in. To boost competition, we are encouraging smaller airlines to enter the market, especially on regional routes. This approach leverages supply and demand to naturally moderate ticket prices, making air travel accessible to more people.
On plans for airlines facing financial hardships...
The industry is sensitive to global changes such as fuel prices or geopolitical conflicts. To support airlines during tough times, we provide policy aid and maintain open communication. Our objective is to keep airlines afloat, preventing any from shutting down due to temporary financial turbulence. We are not just leaving the industry because it is private. We keep talking to them, we discuss with them, to see what best we can do so that the airlines continue their business. For us as an industry, it is very important that we don't let any airline go bankrupt or leave the industry. Through Udan, we provide viability gap funding on unprofitable remote routes, and we've requested state governments to lower taxes on aviation fuel to reduce operating costs for airlines.
On working with states to encourage support to the aviation industry...
States have realised the economic impact of aviation, particularly in job creation and tourism. Many are now building airports on their own initiative. While the Centre guides and facilitates, states are proactively pushing forward. Our approach is holistic, aimed at maximising benefits for both passengers and industry stakeholders.
A brief overview of the sector's progress under the current government...
Over the past decade, we've seen unprecedented growth in civil aviation. When Prime Minister Narendra Modi took office in 2014, we had only 74 airports. Today, that number has risen to 157. No other country has added 83 airports in such a short span... The number of daily air passengers has also doubled, from around 20 million in 2014 to over 40 million, with 500,000 passengers flying daily. This puts us right behind the US. Additionally, our aircraft fleet has grown from 400 in 2014 to more than 800, with another 1,500 aircraft on order. This growth is not just about infrastructure but also job creation and connectivity.
On plans to capitalise on this growth, in terms of job creation...
Our focus is not only on expanding infrastructure but also on boosting the maintenance, repair, and overhaul (MRO) sector. Right now, 95% of engine maintenance is done abroad, but we are working to bring this expertise to India. This will benefit our youth by creating jobs and allowing skilled engineers to work domestically. Policy changes, such as a uniform 5% GST on MRO components and extending the warranty on MRO services from three year to five, have made India attractive for aviation maintenance. Before, MRO components faced varying GST rates-5%, 12%, 18%, or higher- making it hard for businesses to thrive. Now, with a single 5% GST rate, we're creating a stable environment for growth. By extending the import timeframe for MRO parts to one year, we're ensuring operational flexibility.
On moves to keep air travel affordable and connected to far flung areas...
Through the UDAN (Ude Desh ka Aam Naagrik) scheme, we've improved connectivity to underserved and unserved airports across India. This scheme provides financial support to airlines on routes that may not be commercially viable otherwise. As a result, 600 routes have been launched and over 120 are fully operational today. By lowering costs and increasing route options, we're enabling travellers from tier-2 and tier-3 cities to fly affordably.
On ensuring fair pricing in an effective duopoly...
We monitor airfare trends closely. When we see unusual price fluctuations, we engage with airlines to keep rates in check. And we want more airlines to come in. To boost competition, we are encouraging smaller airlines to enter the market, especially on regional routes. This approach leverages supply and demand to naturally moderate ticket prices, making air travel accessible to more people.
On plans for airlines facing financial hardships...
The industry is sensitive to global changes such as fuel prices or geopolitical conflicts. To support airlines during tough times, we provide policy aid and maintain open communication. Our objective is to keep airlines afloat, preventing any from shutting down due to temporary financial turbulence. We are not just leaving the industry because it is private. We keep talking to them, we discuss with them, to see what best we can do so that the airlines continue their business. For us as an industry, it is very important that we don't let any airline go bankrupt or leave the industry. Through Udan, we provide viability gap funding on unprofitable remote routes, and we've requested state governments to lower taxes on aviation fuel to reduce operating costs for airlines.
On working with states to encourage support to the aviation industry...
States have realised the economic impact of aviation, particularly in job creation and tourism. Many are now building airports on their own initiative. While the Centre guides and facilitates, states are proactively pushing forward. Our approach is holistic, aimed at maximising benefits for both passengers and industry stakeholders.
Nominations for ET MSME Awards are now open. The last day to apply is November 30, 2024. Click here to submit your entry for any one or more of the 22 categories and stand a chance to win a prestigious award.
