Cities and Aviation Policy

The economic potential of many good tier two cities like Mysore , Puducherry, Kanpur, etc have been stunted by the lack of speedy connectivity with the economic hubs of our country. One can be certain that the Land Acquisition mess wont be solved anytime in the near future. This decreases the possibility of speeding up connectivity through railways or bigger Highways. The only hope is Air Travel.

Let me take the example of Mysore. Although it has been on the nation's aviation map since the 1950s , it has extremely irregular services and as of now, even those services have stopped. So what's preventing Mysore, which is about an hour's travel by air from Bangalore from being properly connected by Air ? The short answer is the usual- Bad Government Policy.

The Union Government through the Aviation Ministry and the DGCA (Directorate General of Civil Aviation) has succumbed to a lobby of already existing airlines and stood silent as a cartel was formed. This cartel has lobbied the DGCA to create ever more complex rules to prevent entry of new players into their 'cash cow' markets such as international flying. Air Asia India’s CEO Mittu Chandiliya rightly said –‘ I believe in free markets and open skies, but if you look at the policies we have in place, I don’t think we have that at all.’ [i]

Our policymakers, in the false belief that airports and air travel isnt useful to the 'poor' that they supposedly serve have over the years created and enforced an extortive tax policy. The Union Government levies an 18% duty on Aviation Turbine Fuel(ATF) which includes 8% excise duty and 10% customs duty. A weighted average of the taxes the states levy is around 22%. So airlines end up paying around 28% of fuel expenditure as taxes. Compare this with China which has no consumption tax on Jet Fuel[ii] .

As Captain Gopinath writes in the ET – ‘..fuel and taxes constitute 45 per cent of an air ticket, airport charges exceed 20 per cent on long distance flights and make up more than 30 per cent of the airfare on shorter ones’[iii] What this ensures is – Airlines use countries like Singapore, Sri Lanka and Bangladesh for their MRO (Maintenance, Repair and Overhaul) and many a times through clever scheduling- refuelling aircrafts. We are not only losing a lot of jobs due this policy, but the government is also losing a lot of revenue that could have been generated from these activities.

As usual, the response of the Ministry of Aviation is proposing a uniform ATF tax for the entire union which will subsume state taxes. Its been proposing one for about 7 years atleast now. Nothing has and ever will come out of it as states are demanding that fuel taxes be included in the exempted list for the Goods and Services Tax. That doesn’t stop them from foolishly trying it though. Recently, the Aviation minister started requesting states directly to reduce such taxes. It has started bearing some fruits in Andhra Pradesh where VAT on ATF was cut to 1% ! [iv].

Some other states like West Bengal, Jharkhand, Chhattisgarh and Madhya Pradesh have tried this too and it is showing expected results i.e. more passengers, scheduled flights and newer routes[v]. It has also predictably led to fall in passenger fares. And guess what, most of the new flights are to small towns and cities as they don’t levy state taxes on ATF in these places. (The very justification of the infamous 5/20 rule and ‘domestic credits’ is to increase domestic connectivity to smaller towns and cities).

This increased connectivity is not only contributing to the local economy in terms of an increased tourism and hospitality sector, it is also enabling the advent of ecommerce in these towns and cities. It also enables local manufacturers to better integrate into national and global supply chains. A win -win aint it?


[i] . http://www.business-standard.com/article/companies/airasia-india-chief-slams-red-tapism-wants-free-markets-and-open-skies-115062300306_1.html


[ii] http://www.platts.com/latest-news/oil/singapore/china-sees-limited-impact-from-higher-consumption-27888332


[iii] http://articles.economictimes.indiatimes.com/2014-07-08/news/51191434_1_aviation-sector-civil-aviation-new-airports


[iv] http://timesofindia.indiatimes.com/business/india-business/Andhra-Pradesh-government-slashes-VAT-on-ATF-to-1/articleshow/42832229.cms


[v] http://indianexpress.com/article/business/economy/small-town-india-takes-off-with-sharp-atf-cuts/

On Digital India

Observe the scheme carefully and how it operates...

Every Tom Dick and Harry in Electronics manufacturing announces a new plant for manufacturing X with capacity of Y/annum.Then a few days later, he writes op-eds and holds Press Conferences asking for a favorable duty structure. Government functionaries scared of a Modi pull up over not concentrating on Digital India in 'Mission Mode' usually acquiescence.
Digital India is brought up by every buffoon in the cabinet as a panacea to all ills and structural problems in Indian Industry. He/she is portrayed as a visionary minister using tech to solve problems by his media managers.
The government then announces that it will be investing N thousand crores in Telecom Infrastructure to enable the PM's Digital India dream to come true. Again statements are put out by Industry Leaders saying that Digital India is extremely important to India's future. 
Retards write op-eds on how improved connectivity due to government investment will enable Tier 2 cities to reach their full potential. What these baptist- bootlegger alliance of retards and buffons have managed to do is create an atmosphere wherein there is a general public demand for such badly structured investment.
To buttress the point the Digital India is amruta, new uses are pointed out- eliminating information asymmetries in Agricultural Markets (while continuously ignoring who caused those information asymmetries in the 1st place- government regulation in the form of APMC acts and ESMA ). The public- especially the middle class lap it up.
What is ignored is that government investment in this sector is 'needed' not because private players are not willing to invest there. They are! What prevents them from doing so is the amount of kickbacks they would have to shell out to government officials in the Center, State and Local Municipalities. There is also a general hysteria over telecom towers which governments have to mollify in the form of higher standards for towers. And as you all know, private players do a much better and efficient job then the white elephant BSNL.
So, the next time you read about how visionary this scheme is, remember that it is your tax money which is being wasted.
Ive written a bit on Telecom Markets in my post on Net Neutrality. Do check it out.http://notyetlokayata.blogspot.in/2015/04/on-net-neutrality-fracas.html

Panditji's China Policy -1

Panditji's China policy can be summarized as 1 ounce of Delusion, 1 ounce of Misinformation and 2 ounces of stupidity. Panditji repeatedly sacrificed India's national interest in trying to take into account 'larger considerations' i.e. his 2 favorite bogeys - World Peace and The need for a continued Sino-Indian friendship.

 Let me elaborate a bit.
As Arun Shourie ji has shown in his  book- 'Self-Deception; India's China Policies - Origins, Premises, Lessons' , India's China Policy during Panditji's rule had a 2 step response to any Chinese Aggression.
1. Suppress Information
2. Deny

The phenomenon of our leaders(including the present PM Narendra Modi) repeatedly misleading the nation into reading more into statements and Joint Declarations than is warranted isnt new. It has rather ancient roots(I will elaborate on that some other day). In contemporary times, it started with Panditji.

Yes, you guessed it right- Tibet. Most of you may have read Sardar Patel's prophetic letter to Panditji warning him about the imperialistic designs of the Chinese. If not, do read it here- http://www.friendsoftibet.org/main/sardar.html

While the Chinese were screaming that they will 'Liberate Tibet', Pandiji in his delusion thought that no such thing will happen as it would be counterproductive for the Chinese themselves given the precarious position of their UNSC seat. He was deluded enough to think that the Chinese were afraid that the world would get a bad impression of them !!

When they did take over Tibet, Panditji started advocating meek acceptance. That didnt shock me. What shocked me were the reasons he gave for doing so-

1. ' In the long term view, India and China are two of the biggest countries in Asia bordering on each other and both with certain expansive tendencies, because of their vitality ' . Do notice how he paints India as having expansive tendencies to justify not responding to China's aggression even though India had born the brunt of aggression by outsiders for over a millennia by then.

2. ' We cannot save Tibet, as we should have liked to do, and our very atempts to save it might well bring greater trouble to it. It would be unfair to Tibet for us to bring this trouble upon her without having the capacity to help her effectively. It may be  possible, however, that we might help Tibet to retain a large measure of her autonomy. That would be good for Tibet and good for India. As far as I can see, this can only be done on the diplomatic level and by avoidance of making the present tension between India and China worse. '

Notice how Panditji uses 'as we should have liked to do'. This should be read in the context of the fact that he had kept the Tibetan Delegation in Delhi asking for his support waiting for months and when he did meet them, refused to do anything except help them diplomatically. Panditji still harbors the delusion that China would grant Tibet a large measure of autonomy. He then talks about diplomatic solutions. This should be read in the context that immediately after writing this , Panditji declares
 'I think that in no event should we sponsor's Tibet's appeal. I would think that it would be a good thing if the appeal is not heard in the Security Council or the General assembly. ......

Tibet I think is still grateful for the help Panditji gave 'diplomatically'!!

Note to readers- I have heavily drawn from Arun Shourie ji's book for this post.