While a strike by pilots disrupted Air India operations for 58 days, Kingfisher Airlines’ engineers and pilots also struck work over non-payment of several months’ salary dues
It was not smooth sailing for the Indian aviation industry in 2012 as it saw the grounding of Kingfisher Airlines and financial trouble hitting Air India and other carriers besides a prestigious $500 million airport upgrade contract bagged by a leading Indian infra firm being terminated by the Maldives government, reports PTI.
To provide some succour to the ailing Indian carriers, the government came up with some pro-industry policies like allowing foreign airlines to invest in their Indian counterparts, but to no avail.
Even steps to check high air fares did not have the desired impact and affordable ticket prices remained a distant dream. This also led to a fall in domestic air traffic, with the passengers carried by Indian airlines dropping 2.94% between January-November compared to 2011.
A negative development was the ‘unilateral’ termination of the prestigious Male airport expansion and modernisation project contract awarded to major infrastructure firm GMR, by the Maldives government. The contract was awarded to the Indian company by the previous regime there in 2010.
The FDI liberalisation move saw no takers, though there were hopes that 2013 would witness some interested foreign airlines picking up equity in Indian carriers, some of whom were in talks on the issue.
Commenting on the FDI decision, IATA chief Tony Tyler said, “As long as high taxes prevail, high airport costs and high cost of operations exist, you are not going to get a lot of people to invest in airlines.”
While welcoming the move, he said, “Unless conditions in India are improved for the airlines, you are not going to see a flood of foreign carriers coming into the industry. Foreign capital needs a return just as anywhere else.”
The year also saw the government coming to the aid of Air India by promising additional equity of Rs30,231 crore in tranches between 2012 and 2021 provided the airline fulfils the tasks set out for it in a time-bound manner as per its Turnaround and Financial Restructuring Plans.
While a strike by pilots disrupted Air India operations for 58 days, Kingfisher Airlines’ engineers and pilots also struck work over non-payment of several months’ salary dues.
This led the airline to declare a lockout, grounding its entire operations. Soon thereafter, aviation regulator Directorate General of Civil Aviation (DGCA) suspended its flying permit, which in any case expires on 31st December.
The Vijay Mallya-owned carrier has now submitted an interim revival plan to resume limited operations from 2013.
But it can do so only six to eight weeks after DGCA allows it to fly again due to refresher training and medical tests of its crew.
The problems which led to the closure of Kingfisher Airlines cannot be seen as teething troubles or natural pains of an emerging sunrise sector but were more systemic in nature, industry sources said while referring to other carriers which suffered losses but carried on flying.
High taxes on jet fuel were a major concern for the entire industry which led the government to allow the carriers to directly import the item. But problems of infrastructure like storage and transportation of jet fuel to airports, which are controlled by the oil marketing firms, remained to be solved.
To check high fares, government decided to do away with the airport development fee being charged from passengers coming to and going out of Delhi and Mumbai airports from January and asking Airports Authority of India not to charge it at Kolkata and Chennai airports being developed by it.
The AAI was also asked to infuse more equity in the joint ventures operating the Delhi and Mumbai airports.
Air India also inducted the first few of the 27 Boeing 787 Dreamliners and put them into service in select domestic and international routes.
With these next-generation planes, the national carrier announced launching of new flights in its bid to expand its route network and resuming closed down domestic services, aiming to corner more passenger traffic.
A series of initiatives in this regard saw improvements in its passenger loads, revenues and some stemming of its losses.
The Indian government also decided to hive off Air India’s engineering and ground handling services into two wholly-owned subsidiaries.
The long-awaited integration of staff of the two erstwhile carriers (Indian Airlines and Air India) finally took shape after five years of their merger, with the implementation of the recommendations of the Justice Dharmadhikari Committee.
Playing a pro-active role, government also considerably opened up the air services agreements (ASAs) with other countries, allowing all Indian airlines to take advantage of it and mount more international flights.
The civil aviation ministry led by Rashtriya Lok Dal (RLD) chief Ajit Singh saw a new post of minister of state being created and taken over by an important Congress leader from Kerala, KC Venugopal.
It also witnessed a change of guards among its top officials, with senior bureaucrat EK Bharat Bhushan being shunted out of the ministry as the DGCA head. The year also saw Nasim Zaidi being replaced on his retirement as the Civil Aviation Secretary by KN Shrivastava.
India, along with major countries like the US, Russia and China, launched a united opposition to the European Union's move to impose a carbon tax by including aviation in its Emissions Trading System (EU-ETS). Global efforts under the International Civil Aviation Organisation are now on to work out a resolution of the issue.
The ministry was working on a legislation to create the Civil Aviation Authority, with financial and administrative autonomy, to replace DGCA. It was also in the process of creating a separate Aviation Security Force.
Though a series of statements were made regarding promoting of air connectivity to Tier-II and Tier-III cities and creation of airport and other aviation infrastructure there, concrete measures on the ground are still to be taken.
In March 2012, the Lok Sabha passed an ambitious bill to lay judicial standards but despite two sessions of Parliament the bill could not be brought in the Rajya Sabha
Judicial reforms were the flavour of the year in India as the government focused its efforts on bringing a bill on judicial accountability and kept up its plans to change the present system of appointment of judges where the executive has little say, reports PTI.
In March, the Lok Sabha passed an ambitious bill to lay judicial standards but despite two sessions of Parliament the bill could not be brought in the Rajya Sabha.
Besides concentrating its energies on the bill on judicial standards and accountability this year, the government also reiterated its plans to change the present mechanism of appointment of senior judges by a collegium of judges.
The year also saw a change of guard in the law ministry with Ashwani Kumar taking over as the new minister from Salman Khurshid, who was made the external affairs minister. Kumar is the third law minister in the UPA II government, with the first M Veerappa Moily now heading the petroleum ministry.
The Judicial Standards and Accountability Bill was passed in the Lok Sabha during the Budget session amid din over the Telangana issue.
Following stiff opposition by eminent jurists and the higher judiciary, government had agreed to have a relook at a controversial clause which debars judges from making verbal comments against any constitutional authority in open courts. But the government decided to retain the clause.
A meeting of the Union Cabinet, chaired by prime minister Manmohan Singh in December 2012 approved amendments to the bill.
While deciding to retain the controversial clause, it has made some changes in it to ensure it “stands the test of Article 14 which deals with equality before law”.
The earlier clause prohibited judges from making “unwarranted comments against conduct of any constitutional or statutory authority or statutory bodies or statutory institutions or any chairperson or member or officer thereof, or on the matters which are pending or likely to arise for judicial determination”.
The amended clause debars judges from making unwarranted comments against conduct of any “constitutional body and other persons”.
The measure allows citizens to complain against corrupt judges but has been facing criticism for the provision which jurists say would “virtually gag” the judges in open courts.
The bill, with fresh amendments, is now likely to come up during the Budget session next year.
In his first official press conference last month, Kumar said the government is working on a proposal to change the present mechanism of appointment of judges by a collegium of judges.
He said there was a “large political consensus” to put in place the alternative mechanism.
Under the present collegium system, the executive has no say in appointments of judges of the Supreme Court and the high courts as the recommendations of the collegium are final and binding on the government.
The last effort to replace the collegium system in 2003 could not succeed. The then NDA government introduced a Constitution Amendment Bill, but the Lok Sabha was dissolved when the bill was before a Standing Committee.
As per the proposed guidelines, the NBFCs have to recognise a loan as NPA if it is not serviced for 90 days from the present 180 days
Mumbai: The proposed guidelines by the Reserve Bank of India (RBI) for the non-banking finance companies (NBFCs) are likely to impact the profitability of these entities by 15-20 basis points (0.15%-0.20%) in medium-term, reports PTI quoting a research report by the rating agency ICRA.
“...the proposed revision in the NPA (non-performing assets) recognition norm to 90 days (against the existing 180 days), along with the adoption of higher provisioning requirements for NPAs and standard assets (in line with that for banks) could lead to a dip in NBFCs’ profitability by 15-20 basis points over the medium term.
“...The higher Tier-I capital requirement could translate into a decline of around 115 basis points in the sectors’ return on equity (ROE),” the report said.
As per the proposed guidelines, NBFCs have to recognise a loan as NPA if it is not serviced for 90 days from the present 180 days.
It also proposes to implement 10% capital adequacy ratio (CAR) norm for most of the NBFCs.
“While this is in general a positive step, some NBFCs offering products with annual or quarterly repayments may find their asset quality turn volatile because of this change,” it said.
The report also added that further increase in Tier-I capital as well as risk weights for some other asset classes would reduce the leveraging capacity of NBFCs compared to banks.
The research firm also said lack of access to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act as well as any liquidity back-up would continue to weigh on the performance of NBFCs.
Referring to liquidity management, the report said it may increase the cost of doing business for NBFCs.
It, however, added that enhanced disclosures are positive for the NBFCs.
According to the proposed guidelines, NBFCs have to seek prior approval from the RBI in case of change in shareholding by 25% or above, and appointment of chief executive officer in a NBFC with an asset size of more than Rs1,000 crore, among others.