To usher in further reforms in the civil aviation sector, the government is believed to have approved the Aviation Goods Interest Protection and Enforcement Bill, 2024, sources told BusinessLine.
The bill will therefore reduce aircraft leasing and financing costs for Indian airlines, thereby reducing airfares as well. Currently, the majority of India’s commercial aircraft are leased.
The bill was approved by the Cabinet on Thursday, sources said. It will now be submitted to the Diet. If passed, the resulting Aircraft Goods Interest Protection and Enforcement Act of 2024 would guarantee lessors the right to take back leased equipment.
In the process, the Act would ratify the Cape Town Convention. The treaty is a global treaty that guarantees lessors the right to take back expensive leased equipment such as aircraft, helicopters and engines in the event of non-payment.
This legal instrument was adopted at a diplomatic conference held in Cape Town in November 2001 under the auspices of the International Civil Aviation Organization (ICAO) and the Unified International Institute of Private Law (UNIDROIT).
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Notably, although India is a signatory to this treaty, Congress has not ratified it. This unique situation gave the district court’s decision priority over the convention’s norms.
As a result, an interdepartmental consultation process to amend the bill was initiated last year and submitted to Parliament in 2018.
The revised bill was brought in the wake of the Go First crisis, which left global lessors concerned about leasing aircraft to India-based airlines. The country is increasingly considered a “dangerous jurisdiction.”
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The bill would allow the provisions of the treaty to prevail in cases of conflict with other laws, officials said.
This will empower the Center to make necessary rules to implement the Convention and Protocol in India. This is expected to increase lender confidence in India’s civil aviation sector, reduce financing costs and have a positive impact on airfares.
The industry has welcomed this development.
“With more than 2,700 new aircraft expected to be introduced in India over the next 20 years, the rapidly growing aviation industry requires solid infrastructure, supportive policies and strong financing mechanisms. Recognizing the Cape Town Convention under the Act “This is essential for the smooth movement of aircraft assets in this fast-growing market. Failure to ratify would create risks for creditors and increase lease rates for airlines.” Asia President Salil Gupte told BusinessLine.
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