New aviation minister to inherit a tough field | india | Hindustan Times
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New aviation minister to inherit a tough field

india Updated: May 18, 2009 20:30 IST
HT Correspondent
HT Correspondent
Hindustan Times
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The new civil aviation minister may not have a smooth take-off as he or she would inherit a welter of problems that can only prove to be a headache for a fiscally strapped government.

First state-owned Air India needs a much needed relief package of Rs 4,000 crore in equity and soft loans to give it some financial respectability amid an industry crisis.

Private players included, the sector’s cumulative losses add up to Rs 10,000 crore or so, and the industry as a whole is crying out for an easier tax structure to heal the wounds of expansion and aggressive competition before an economic downturn hit the sector.

The minister will also have to deal with the reality that jet fuel in India attracts between 14 to 35 per cent sales tax — nearly double that of global levels.

After growing by more than 30 per cent in 2006-07, the sector went into a tailspin, triggered essentially by high crude oil prices globally followed by the global economic downturn.

The sector is now growing at 9 per cent per annum, considered slow, while seats go abegging in many flights as demand levels do not match profitable pricing.

“The civil aviation sector in India was poised for expansion like no other sector. Crude oil prices touched Rs 71,000 per kilolitre that left the sector groping in the dark for alternatives,” an aviation expert at a global management consulting firm told Hindustan Times.

Not only will the new incumbent have the onerous task of bailing out the bleeding state-run Air India which is in losses amounting to Rs 2,800 crore, he or she will also have the task of getting the airport infrastructure in place.