The Hindu : ICAO proposes war risk insurance scheme for airlines

Online edition of India's National Newspaper
Sunday, Feb 09, 2003

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ICAO proposes war risk insurance scheme for airlines

By Gargi Parsai

New Delhi Feb. 8. The Bangkok-based International Civil Aviation Organisation (ICAO) has formulated a global war risk insurance scheme, called ``Globaltime'', to provide adequate insurance cover, in the short and medium term, to airlines, while allowing private insurance markets to recover in the aftermath of the September 11, 2001 and the Colombo attacks in July 2001.

After these two major terrorist events, commercial insurance coverage was withdrawn or substantially reduced.

Without the required war risk insurance, carriers could not be licensed to operate by their governments and states had to come to the aid of some of the airlines.

The voluntary scheme — to cover temporarily the risks left open by the aviation insurance markets — will be subject to being backed by state guarantees. According to the ICAO Director, A.P. Singh, the ICAO will proceed with the proposal only if the Government represents at least 51 per cent of the ICAO's annual funding, offer expression of interest for the proposal by February 14, 2003.

The deadline had been extended to February 14 from October 15, 2002 to allow for additional time to deal with critical legal, legislative and administrative issues associated with the scheme.

Mr. Singh said that so far states representing about 43 per cent of annual contributions had notified their intention to participate in the scheme.

Referring to the scheme, which needs to be backed by the Government, the Chairman-cum-Managing Director of Indian Airlines, Sunil Arora, said the annual impact of insurance for Indian Airlines had gone up from Rs. 37 crores in 1998-99 to Rs, 182 crores in 2002-03.

He was speaking on `Civil Aviation: Fuelling Growth' at the India Infrastructure Show here today.

He said insurance costs and the high cost of aviation turbine fuel were the issues ``plaguing'' airlines all over the world.

There had been a quantum jump in the ATF costs due to hike in duties and high add-ons by public sector oil companies, besides the high rate of sales tax being levied by States.

The Indian Airlines' fuel bill had risen from Rs. 866 crores in 1999 to Rs. 1,300 crores.

Emphasising the need for rationalisation, Mr. Arora said goods of special importance should be declared as `declared goods' under the Central Sales Tax Act as had been done for ATF sold for turbo-prop aircraft.

Sales tax under this category cannot exceed four per cent. This will bring relief to aircraft operators, which will reflect in passenger fares.

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