The government has approved the Aircraft Leasing Bill, which is expected to enhance the Indian aviation industry.
The government is reportedly moving forward with reforms in the civil aviation sector by approving the Protection and Enforcement of Interests in Aircraft Objects Bill, 2024, according to sources cited by businessline.
This legislation aims to reduce leasing and financing costs for aircraft used by Indian airlines, which is expected to lead to lower airfares. Currently, most commercial aircraft in India are leased.
Sources indicate that the Cabinet approved the Bill on Thursday, and it is set to be presented to Parliament. If enacted, the Protection and Enforcement of Interests in Aircraft Objects Act, 2024 will secure the rights of lessors to reclaim their leased assets.
Additionally, the Act will endorse the Cape Town Convention, an international treaty that protects lessors' rights to recover high-value leased equipment, including aircraft, helicopters, and engines, in the event of payment defaults.
This legal framework was established during a diplomatic conference in Cape Town in November 2001, organized by the International Civil Aviation Organisation (ICAO) and the International Institute for the Unification of Private Law (UNIDROIT).
While India is a signatory to the convention, it has yet to be ratified by Parliament, resulting in local court decisions taking precedence over the convention's provisions.
In response to this situation, an inter-ministerial consultation process was initiated last year to revise the Bill, which was originally introduced in Parliament in 2018.
The updated Bill has emerged following the Go First crisis, which raised concerns among global lessors regarding the risks of leasing aircraft to Indian airlines, leading to the perception of India as a 'risky jurisdiction.'
The legislation indicates that, in the event of a conflict with any other law, the provisions of the convention will take precedence.
It will authorize the central government to establish the necessary regulations for the implementation of the convention and protocol within India. This move is anticipated to enhance the confidence of lessors in the Indian civil aviation sector and lower lending costs, which could lead to a reduction in airfares.
The industry has expressed its support for this initiative.
“With over 2,700 new airplanes anticipated in India over the next 20 years, the rapidly growing aviation sector requires a robust infrastructure, supportive policies, and strong financing mechanisms. Recognizing the Cape Town Convention under Indian law is vital for the smooth movement of aircraft assets in this fast-growing market. The absence of ratification poses risks for creditors, increasing leasing rates for airlines,” Salil Gupte, President, Boeing India and South Asia told businessline.
- Businessline