COMPREHENSIVE POLICY NEEDED FOR FUTURE GROWTH OF CIVIL AVIATION SECTOR
The Confederation of Indian Industry has called for allowing foreign airlines to invest up to 49% in domestic carriers.
“A liberal FDI regime would pave the way for foreign airlines to participate in India’s aviation sector and strengthen it. A comprehensive policy direction is needed to address the prevailing crisis and lay a path for future growth,” stated Mr Chandrajit Banerjee, Director General, CII.
Aviation sector in the country is going through a tumultuous phase and the Policy should create an enabling framework for safe, secure, efficient, investor friendly and a viable aviation sector in the country. A liberal FDI regime would also instill confidence among foreign investors, including overseas hedge funds and private equity groups, in the domestic carriers.
Highlighting the need for building a MRO (maintenance, repair and overhaul) industry in India, the CII statement said that the MRO space is a $45-billion market globally, of which India constitutes only 1%. Indian carriers together have a fleet nearing 1000 aircraft, comprising Boeing, Airbus and ATR models. Another 1000 Commercial Aircraft are forecast to be purchased in next two decades. MRO constitutes a vital element of aviation infrastructure. At present, airlines in India currently outsource major checks and aircraft servicing to MRO hubs like Singapore, Malaysia, South Korea, China, Japan and Dubai.
To increase MRO business in India, CII has suggested rationalization of taxes and customs duties. Servicing an aircraft in India entails service tax of 12.36% as compared to nil tax overseas. Further, importing spares involves customs duties of 25.40%. Deemed export status to MRO business in India and allocation of land for hangers at airports would also promote the sector.
CII suggested that the new policy should review bilaterals, to allow Indian carriers greater utilization so that the share of Indian airlines in international traffic goes up. Wherever there is traffic potential from a point of call in India to a specific country, Indian carriers must be given preference to add capacity to serve the market before granting access to foreign airlines.
Recommending a regulator for air transport sector, CII has recommended that its role and responsibilities could include promotion of healthy competition in the aviation sector, in addition to air safety, airspace regulation and consumer protection. The regulator should attempt putting in place a mechanism to stop predatory pricing of air fares.
The other important aspect that the new Civil Aviation Policy must address is the route dispersal guidelines. There is a need to review, update and revamp existing route disbursal guidelines, considering the present day situation where several airlines are flying. CII has specifically recommended that State governments waive sales tax on ATF.
Also, AAI should waive landing and route navigational charges at Category II airports. Alternatively, the Ministry of Civil Aviation could create an essential air services fund or regional air connectivity fund to compensate airlines which fly on uneconomical routes (category II and III routes). This fund could be created primarily through a contribution of central and state governments and a marginal contribution of airlines.
CII has also suggested that the Civil Aviation Policy should lay a special focus on cargo aviation in the country and accord the same priority to cargo airlines in terms of access to airports, allocation of parking bays and slots as it gives to passenger airlines.
On air turbine fuel, CII suggested that sales tax on ATF be made specific from ad-valorem and permission for direct import of ATF be granted to airlines.
The Policy should also ensure efficient air traffic flow management services and ATC automation.
While general aviation has been growing at a rapid pace, there is hardly any support in the existing policy framework. Rather, it is subject to several restrictions. CII suggested that a separate policy should be drawn for general aviation recognizing its role and growing importance in the country. The policy should identify steps to be taken up to create a conducive environment for general aviation.