CAA to Replace DGCA

Frailties of the Aircraft Act of 1934 led to the Ministry considering a proposal for formulating a new Act which would instate a Civil Aviation Authority (CAA) to replace the DGCA.

It is customary for the Minister (and other functionaries) of Civil Aviation to emphasise that India is the ninth largest aviation market in the world and that, based on the growth witnessed during the past decade or so, it is going to swell to be the third largest one by 2020. The fact that despite the growth, civil aviation industry is presently going through a severe economic crisis is generally glossed over. Just for the scheduled airlines, the combined estimated losses for financial year 2012-13 are Rs. 10,983 crore and the debt, Rs. 85,865 crore. These are sought to be explained by the establishment as attributable to the spiralling cost of aviation fuel, economic slow down, devaluation of rupee, low yield, high operational costs and the consequent widening gap between revenue and expenditure contributed to this financial crisis.

However, airlines (along with Non-Scheduled Operators and business aircraft owners) blame the government squarely for the current state of affairs, including some of the factors mentioned above. The debate would have languished indecisively but for the fact that the past audits, notably an audit by the International Civil Aviation Organisation (ICAO) in October 2006 under its Universal Safety Oversight Audit Program and another by the Federal Aviation Administration (FAA) of United States under International Aviation Safety Assessment Program (IASAP) in March 2009 of our civil aviation machinery have highlighted the poor track record of the Ministry in policy-making and regulation of civil aviation. In another recent audit of Directorate General Civil Aviation (DGCA) in September 2013, the FAA technical team had indicated 33 deficiencies.

A second round audit took place in December with the threat of a safety downgrade looming large over the Ministry; the audit report is yet to be made public at the time of writing. A downgrade would severely affect international operations by Indian airlines. Whether that injury comes or not, the insult (of an ignominious deficiency list) has already hurt the industry.

The Need for a New Authority

The root of the problem lies in the weakness of the outdated Aircraft Act 1934 which has not kept pace with the growth of civil aviation. As an illustration, there is no provision of an Ombudsman in the Act (unlike other sectors like insurance and banking). Consequently, the DGCA has off and on tried to step down on perceived cartelisation efforts by airlines. Often these actions came under criticism as being outside the purview of the DGCA. Even for its main task of ensuring safe and efficient operations through regulation and audit, the DGCA has been under constant attack as being inefficient and inadequate. Because of shortage of trained personnel and its inability to recruit and retain adequate manpower due to procedural and structural problems, its human resources have remained at stagnant levels while civil aviation (and the need for more manpower) has grown considerably.

Despite being overloaded with increased work and an understaffed corporate office, the DGCA has been in a stranglehold that has made selection of new personnel a long winded process which has not provided quality manpower. It also has limited delegation of financial powers and is incapable of making adequate structural changes to meet the vibrant demands of India’s civil aviation. Another consideration was that many other advanced nations (led by the US) had CAA models to emulate.

The CAA Act

Such frailties of the Aircraft Act led to the Ministry considering a proposal for formulating a new Act which would instate a Civil Aviation Authority (CAA) to replace the DGCA. Initially planned to be introduced in the Budget Session this year (2014-15), the Bill was finally introduced in the monsoon session as Civil Aviation Authority of India Bill 2013 on August 20 by the Minister of State for Civil Aviation K.C. Venugopal. At one time there had been speculation that the CAA Act itself would replace the Aircraft Act, 1934.

However, Section 41 of the draft Act states that “The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force”, while Section 45 stipulates that a new subsection be inserted at the appropriate place (Section 2B) in the Aircraft Act, 1934 to the effect that, “the ‘Director-General of Civil Aviation, means Director-General appointed under Section 4 of the Civil Aviation Authority of India Act, 2013”. The CAA would take over the responsibilities of the DGCA in areas of air safety, airspace regulation, setting aviation standards, licensing of airlines, pilots, air traffic controllers and consumer protection.

The main functions and powers of the proposed CAA would be to regulate civil aviation safety and provide for the better management of civil aviation through safety oversight of air transport operators, airport operators, air navigation service operators and providers of civil aviation services. It will also issue licences, certificates, permits, and approvals required to be issued under the Aircraft Act, 1934 and Aircraft Rules. Besides, it will also provide environment regulations for airports, airlines and other civil aviation activities and protect interest of the consumers. It would have financial and operational autonomy to take decisions on matters relating to a range of activities and to conduct investigations. It would have the power to issue directions, the power of seizure and the power to punish any person, operator, company or a Government Department for failure to comply with its orders or directions.

The Act aims to provide for an Authority which would have a Chairperson, a Director General and between seven and nine members, including five whole-time members. All the members would be appointed by the government on the recommendation of a Selection Committee headed by the Cabinet Secretary. It would be empowered to levy fees and charges under the Aircraft Act ,1934 and would be self-financing. It would establish a separate fund, called the Civil Aviation Authority of India Fund, which would get budgetary support and be used for all expenses of the authority.

The idea is to give the new CAA full functional and financial autonomy so that it would be able to recruit its own staff, decide on its pay structure, and have the powers to fix and collect fees for rendering services to the civil aviation industry stakeholders. The CAA shall have a separate fund, the Civil Aviation Authority of India Fund which will be used for all expenses of the authority i.e. it will be a self-funding entity duly authorised by the Government and will have the power to fix and collect fees and charges for all functions, duties and services required to be performed by the Authority. It may also levy charges for safety oversight functions of the air navigation services, safety fee from the passengers for safety oversight functions and safety fee for surveillance inspection of air transport operators with prior permission of the Government.

It is proposed to create this fund by collecting fee from air navigation service providers and passengers in addition to the budgetary support given by the Government. At the time of the budget session, a sum of Rs. 5 per air ticket was being talked about as a universal levy on all air travel in India to fund the CAA’s functioning. Currently, the figure being mooted is Rs. 12 per air ticket. Clearly, the frequent flier has no reason to be overjoyed by this arrangement.

The CAA would be empowered to undertake its own recruitment of professionals, which is currently carried by the Union Public Services Commission (UPSC) for DGCA (one of the “severe deficiencies” pointed out by ICAO and FAA had been the fact that around 40 per cent of its posts were lying vacant and that there were problems in creating posts and hiring of personnel). It will also have full autonomy to regulate all issues concerning consumer protection and environment regulations in the civil aviation sector would also be addressed by the CAA.

Conclusion

The move to install a CAA to replace the DGCA appears irreproachable inasmuch as a regulator placed intermediately between the government (which itself owns a loss-making behemoth of an airline), and the traumatised private airlines, ought to be a good prescription for the tender, loving care that the industry is grieving for. However, if the historical background of independent regulators in India is anything to go by, the CAA is doomed to mediocrity. In all probability, the CAA (and at least some of the members) proposed “the recommendation of a Selection Committee headed by the Cabinet Secretary” would be retired IAS officers (or at best retirees from other civil services) who would carry their own baggage of how to administer. While these candidates would be eminently qualified to regulate efficiently on account of their familiarity with the mechanics of policy making, their ‘generalist’ disposition would render them less than ideal for an industry requiring highly specialised services and products.

Placing industry professionals with grassroots comprehension of the industry dynamics at the top of the CAA hierarchy would be a more gainful route to follow. That would also go a long way towards the new Authority establishing much needed credibility for itself, setting higher and higher standards of regulation, and raising Indian civil aviation from its current unenviable state. Should that not happen and the new CAA be the same old bureaucratic wine in the same old bottle with a new label, Indian civil aviation might as well resign itself to another decade of somnolence.