With Kingfisher Airlines facing serious financial crisis and most others making losses, an industry chamber on Sunday said the government needs to rationalise taxes on the aviation sector and ease FDI norms to allow foreign airlines to pick up stake in Indian carriers.
"The government allows FDI of up to 49% in Indian carriers. However, foreign airlines are not allowed to invest directly or indirectly in domestic carriers, a rule the government should scrap for healthy growth of civil aviation sector," ASSOCHAM secretary general D S Rawat said.
The statement could be music to the ears of Kingfisher owner Vijay Mallya who has himself been raising this demand for several months now. However, other carriers like Jet Airways have been opposed to it.
Asking the government to formulate a new civil aviation policy, Rawat said in a report that the aviation industry has all ingredients to grow but airlines were facing huge losses as over one-third of operating costs were due to the price of aviation turbine fuel which was heavily taxed.
To keep pace with the booming passenger and cargo traffic, the industry needs an investment of Rs 1.5 lakh crore over the next 15 years, the ASSOCHAM official said.
"But major private and government-owned airlines like Air India, Jet Airways, Kingfisher Airlines and SpiceJet have flown into debt turbulence due to elevated fuel costs and fierce price wars.
"Airlines could suffer losses worth about Rs 15,000 crore in the current financial year with Air India alone likely to account for more than half of it," Rawat said.
The airline industry, he said, required fresh funds and there would be a question mark on their survival if they are unable to raise them.