Narendra Modi's government has unveiled a draft of its proposed National Civil Aviation Policy for 2015 wherein it aims to develop the sector into a cornerstone of the Indian economy.

According to the proposal, New Delhi plans to make flying a more affordable means of transport for Indians in general and aims to accomplish this through a series of revisions to existing legislation, chief among them is the controversial 5/20 rule. Introduced in 2004, the rule requires an airline to have been in service for at least five years and operate at least twenty aircraft before applying for international traffic rights.

As such, the draft has offered a choice of three scenarios, the first of which entails retaining the rule which, despite support from existing carriers such as Air India (AI, Delhi International), Jet Airways (JAI, Mumbai International), and IndiGo Airlines (6E, Delhi International) among others, has been criticized by start-ups such as Vistara (UK, Delhi International) and AirAsia India (Bengaluru International) for artificially curbing growth. The second involves the abolishment of the rule with immediate effect while the third will see it replaced with a DGCA-monitored credit-based scheme wherein airlines earn the right to start international flights by first plying domestic routes.

Under the revised credit-based scheme, domestic airlines will earn Domestic Flying Credits (DFC) that are defined as being equal to the Available Seat Kilometers (ASKM) deployed by the airline on domestic routes divided by 10 million.

"For aircraft with 100 seats or less, the DFC shall be equal to the ASKMs deployed on Category II, Category IIA and RCS routes using the smaller aircraft, multiplied by the prescribed multiplication factor and divided by 10 million," the Ministry of Civil Aviation said.

Thereafter, an airline will need to accumulate 300 DFCs before commencing flights to SAARC countries (i.e. Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, and Sri Lanka) and countries with territory located entirely beyond a 5000km radius from New Delhi. To fly to other parts of the world, they will need to have accumulated 600 DFCs.

As such, in order to ensure a level playing field, all domestic airlines will be required to earn at least 300 DFCs per annum after commencing international operations in order to maintain their international flying rights. For a new airline, this requirement will commence from the financial year immediately following the year in which it accumulates its first 300 DFCs.

DCAs will also be tradeable among airlines under the guidance of the DGCA.

Concerning India's Bilateral Air Services Agreements (BASA), New Delhi plans to sign more Open Skies agreements which it hopes, will lead to greater ease of doing business as well as a greater variety of choice for customers.

Open Skies agreements with countries lying partly or fully within a 5000km radius from New Delhi will be only considered with effect from April 1, 2020. Even then, they will be on a reciprocal basis and will be limited to India's major international airports. However, should government decide to proceed with such a plan, it would then consider increasing the cap on foreign investor shareholdings in local carriers from the current 49% to more than 50%. This is expected to attract huge attention from carriers such as Qatar Airways (QR, Doha Hamad International) and Etihad Airways (EY, Abu Dhabi International) both of which have already expressed an interest in investing in Indian airlines or have already done so.

A final decision on the policy will be taken once consultations with all relevant stakeholders have been completed.