The Telegraph
Friday , July 11 , 2014
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Aviation players left in the lurch

A sniffer dog checks the budget papers outside Parliament in New Delhi on Thursday. (AFP)

New Delhi, July 10: Hopes of the Indian aviation industry marred by record losses on back of predatory pricing, high fuel costs, airport taxes and general policy paralysis were dashed today after finance minister Arun Jaitley did not come out with any big bang announcements for the sector.

It was hoping that the Narendra Modi-led government would slash taxes on jet fuel, exempt aircraft engines from customs duty and rationalise taxation on maintenance, repairs and overhaul (MRO).

"The aviation sector has been completely been ignored. Other than some decisions on airport infrastructure which need to be read in detail, the budget did not take care of any of problems of the sector. The sector was hoping for tax sops on ATF and MRO facilities so that the industry can come up in the country but this year's budget does not have anything for the sector and the neglect continues," said Dhiraj Mathur, leader Aerospace & Defence, PwC India.

Jet fuel constitutes about 40-45 per cent of the total cost of an airline. The airlines had sought exemption of aircraft engines from customs duty, the officials said, adding that the exemption which was withdrawn in 2012 should be reinstated.

Likewise, the industry was demanding for rationalisation of taxes on MRO. Prevailing high taxation regime has made Indian MROs 20-30 per cent costlier than those abroad, leading the airlines here to repair their aircraft in foreign countries, including Sri Lanka and Singapore.

Aviation experts said that with such a small amount of time in hand before the budget, the aviation sector took a back seat.

"I was not expecting anything from this budget. The government did not have that much of time to make the aviation sector a priority. However some decisions such as development of airport infrastructure are good for the industry. As far as taxes on ATF is concerned the government would have to work with state governments and push for some tax reliefs," said Kapil Kaul, CEO, South Asia, Centre for Asia Pacific Aviation (CAPA).

However, some others believe that the government might take a decision on aviation turbine fuel tax later. "It does not mean that the government would not do anything about the taxes on ATF. Decisions on the subject can be handled later and separately," said Sanjay Singh, vice- president Tata-SIA Airlines.

The government today announced a new scheme to develop airports in metros and non-metro cities through public-private partnership (PPP) to enhance air connectivity and hiked allocation for the civil aviation sector by over 11.4 per cent to Rs 9474 crore in the budget as against Rs 8,502 crore.

Of the Rs 9,474 crore, Rs 6,720 crore is for Plan expenditure whereas Rs 2,754 crore is for non-plan expenditure. Air India has been allocated Rs 7,069 crore (just Rs six crore more than last fiscal) for its operations whereas the Airports Authority Limited has been granted Rs 2,134 crore.

Pawan Hans helicopters Limited has got a substantial hike from Rs 8.67 crore last year to Rs 46 crore this year. Also in a move to attract more inbound tourists, Electronic Travel Authorisation (e-Visa) would be introduced in a phased manner at nine airports in the country.

Necessary infrastructure would be put in place within the next six months for this purpose, Jaitley said. "This would further facilitate the visa-on-arrival facility," he added.