Airline industry looks for big push in Budget

The industry is looking for big push through a string of measures that will boil down to cheaper fares and world class infrastructure.

A rapidly opening Indian aviation industry is looking for a big push from the upcoming Budget through a string of measures that will boil down to cheaper fares and world class infrastructure.

HT Image

Finance Minister P Chidambaram has been given a wish list for the Budget to be unveiled on February 28, including some long pending demands, which if implemented can slash the cost of air travel, making it more accessible to the common man.

Two of the main demands that Civil Aviation Minister Praful Patel has conveyed to the Finance Ministry are: abolition of withholding tax on leased aircraft and classifying aviation turbine fuel (ATF) as declared goods to reduce its cost.

The abolition of withholding tax on leased aircraft, which was reintroduced by the Finance Minister last year but was then rolled back under pressure, is one of the most fervent wishes of airlines.

Various airlines are in the process of leasing up to 100 planes over the next year, point out experts, and the tax would hamper growth by posing an obstacle for budget airlines and smaller operators waiting to begin operations.

"A reduction in the tax on ATF and infrastructure development in the country! There's nothing else the industry can ask for," said Karun Buddhiraja of the Bird Group, a conglomerate of independent companies in the travel and IT sector.

Sales tax of up to 30 per cent charged by states on the sale of ATF has been a bugbear of the industry for some time.

According to the Confederation of Indian Industry (CII), domestic ATF prices were about three times the international prices.

Fuel costs account for a third of the operational cost of airlines. With global fuel prices soaring since January 2004 and high sales tax in Indian states, the cost of air travel, particularly in the domestic sector, is that much more.

Indeed, travelling to Bangkok, point out industry experts, is far cheaper than flying to Kochi under current levies.

The industry has suggested that the Government place ATF in the category of deemed import and impose a duty of four per cent, which is far less. This would also bring uniformity in the fare.

Buddhiraja said the facelift of airports was a major factor in boosting air traffic. "It should be the prime priority of the Government to divest stakes in airports and facilitate their upgrading."

The industry wants a specific thrust in the Budget on development of aviation infrastructure, which they say is an imperative at a time the skies are opening up and capacity is increasing.

In a presentation, CII called for a master plan prioritising the airports and facilities that require major investments. Major airports should be designated key international hubs, it says, and facilities raised to world standards.

The industry has also sought legislation to enable successful airport expansion programmes, apart from a reduction in the landing and navigational costs by slashing service tax.

"The landing and navigation costs should be brought down as they are much higher compared to other countries," said Stic Travels chairman Subhash Goyal, who heads an industry panel on aviation and tourism.

Goyal pointed out that in other countries, budget carriers were able to fly to cheaper airports and contract cheaper fuel.

Airport charges in India are estimated to be 78 per cent higher than the global average. The 12 international airports of India levy charges up to 20 per cent higher than others.