The Ministry of Civil Aviation plans to replace the DGCA with
CAA. DGCA is a regulatory body governing the safety aspects of
civil aviation in India. The CAA on the other hand, will have
complete financial autonomy being financed by a fund known as the
Civil Aviation Authority of India Fund. The Fund will be
established by levying a fee on passengers in addition to the
budgetary allocation by the government. The estimated cost of
setting up CAA will be INR 1120 million. The CAA shall be
responsible for air safety, airspace regulation, setting of
aviation standards, licensing of pilots and consumer protection.
The powers of CAA will include: (a) regulating air safety and
ensuring better management of civil aviation; (b) conducting
investigations, seize and punish; and (c) issuing licenses,
permits, directions under the Aircrafts Act, 1934.
PSA View – The civil aviation industry in
India is in dire need for an overhaul and replacing the DGCA with
CAA may be the first step. The reasons for replacement of DCGA are:
(a) the shortage of trained manpower; (b) DGCA's inability to
retain manpower due to structural problems; and (c) DGCA's
limited financial power and its inability to meet the demands of
the civil aviation sector. With the establishment of the CAA, the
ministry hopes it will be able to handle all such lacunas.
Air Asia- first foreign carrier to spread its wings
Pursuant to the revised Foreign Direct
Investment norms introduced by the Indian government in
September 2012 allowing up to 49% stake in Indian airlines,
Air Asia, the Malaysian budget carrier, becomes the first
foreign airline to venture into the Indian aviation
space. The Foreign Investment Promotion Board
recently approved the proposal of Air Asia to establish a new
airline in India in a Joint Venture with Tata Sons
and Telestra Tradeplace. According to the proposal, the
Malaysian airlines will have operational control at 49%, Tata Sons
will have 30% stake and the minority investor Telestra Tradeplace
will have 21% holding. The airline will be based out of Chennai,
Tamil Nadu and cater to tier-2 and tier-3 cities. The operations
are expected to begin by the end of this year provided all the
approvals are in place.
PSA View – Air
Asia's arrival signals the beginning of a
new aviation chapter in India, which will
also encourage several other foreign airlines to follow suit.
Air Asia's entry will also augment competition in the domestic
budget carrier segment as it will cut into the space
of the other existing low-cost carriers, currently
dominated by Indigo and Spice Jet. In all, the
travelers will benefit due to greater choices, and,
hopefully, better services and travel experiences. However, for the
moment, it is important to see if Air Asia is able to smoothly
steer through the procedural maze before it finally takes off in
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Nishith Desai Associates is a research-based Indian law firm with offices in Mumbai, Silicon Valley, Bangalore, Singapore, Mumbai BKC, Delhi and Munich that aims at providing strategic, legal and tax...
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