Whether AirAsia gets the necessary approvals to start full-fledged domestic airline operations, without having to jump through regulatory hoops, will determine how serious the Government is about attracting investments and showing to the world that India is still a place worth doing business in. As of now, the Malaysian low-cost carrier joint venture, in which the Tatas will also hold a 30 per cent stake, has been given only an ‘in-principle' nod. However, for it to really take off, a whole minefield of clearances has to be crossed. These include an initial no-objection certificate (based on details of the proposed airline's ownership and financial structure, operational routes, type of aircraft and human resources to be deployed, etc) and the final air operating permit from the Civil Aviation Ministry. In addition, there is a separate ‘acquisition committee' within the Ministry that scrutinises applications for import of aircraft, effectively deciding the pace of acquisition and fleet size of any airline.
In short, the ability to launch and induct aircraft to enable a planned scaling up of operations – key to the viability of any aviation venture – is significantly subject to decision-making at the Civil Aviation Ministry. The latter has made no secret of its opposition to AirAsia's entry, claiming that the Government's recent decision allowing foreign airlines to take 49 per cent equity is limited to only existing, and not new, domestic carriers. Even assuming that to be true, it makes no sense; if anything, consumer interest is better served by a new airline rather than the takeover of an existing one. Either way, there is nothing stopping the Government from clearing the fine print. This is not a case, after all, of global tenders being floated and any clarifications, therefore, amounting to post-tender changes.
The larger point here is about the discretionary powers wielded by individual ministries – be it Civil Aviation or Environment and Forests – that can be used to grant or deny clearances selectively. It is this arbitrary and whimsical exercise of authority that has emerged as a considerable source of investor uncertainty, making even reputed businessmen like Kumar Mangalam Birla complain of Licence Raj reappearing in a “new avatar”. This has to be curbed. If AirAsia is going to be denied entry for fear of it triggering a “price war” or creating overcapacity, it will only confirm the general investor perception. These arguments, moreover, have little basis for a country with such abysmally low aircraft penetration, compared to mobile phones or bicycles. The same goes with concerns over limited airport infrastructure, providing an excuse for regulating even import of aircraft. Should these be issues at all, when the airports handling a bulk of the traffic in India are anyway in private hands and the parking bays or hangars in the remaining ones can very well be auctioned? Making them issues shows the Government's old obsession with micromanagement and playing God.