The civil aviation ministry is considering moving a proposal asking for removal of government permission needed for the purchase of aircrafts, a move which will help airlines speed-up fleet expansion in a market growing at 20% a year. The aviation sector was open for private players long time back, however, currently, the companies need to take permission from government to buy new airplanes, which increases the process and time for the expansion of aviation companies.
'We are reconsidering the requirement for this approval, as an aircraft order is purely a commercial agreement between two parties and companies should be free to do so. We should arrive at a decision by next month,' a senior civil aviation ministry official said.
Elimination of administrative barriers would reduce the time needed for getting aircraft into India and this will speed-up the growth of the sector which is registering an annual growth of 20%. The in-principle approval for buying aircraft is viewed as a hurdle in the expansion process. Recently, the low cost airliner Go Air’s aircraft had faced this hurdle in its expansion process as orders were placed without the ministry’s approval. Aviation experts and airline executives say doing away with the required approval would give a fillip to the Indian airline industry, which is forecast to need 1,500 aircraft over the next two decades.
For buying airline, aviation companies need to sing Memorandum of Understanding (MoU) with the aircraft manufacturer and the company has to pay signing amount for the MoU. Sometimes the government in principle approval also helps companies to facilitate financing arrangement, which is done in foreign currency with banks and financial institutions.
Aviation sector experts believe that this is the right time to remove the administrative hurdles for the industry as demand for airplanes are growing in two digits. Previous year, Indian carriers flew around 60 million passengers, which are expected to increase to 362 million by 2021.
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