Rationalise tax structure for aviation sector: Assocham

November 12th, 2011 - 8:35 pm ICT by IANS  

Bangalore, Nov 12 (IANS) With private carrier Kingfisher Airlines cancelling dozens of flights across the country and its competitors Jet Airways and SpiceJet sliding into red, an industry body Saturday called for lowering taxes on jet fuel and relaxing foreign direct investment (FDI) norms to make the aviation sector viable.

“The state-run and private carriers are incurring huge losses as the heavily taxed aviation turbine fuel accounts for one-third of operating costs,” the Associated Chambers of Commerce and Industry of India (Assocham) said in a statement here.

Alarmed over the mounting debt burden of the state-run Air India, Jet Airways, Kingfisher and SpiceJet, Assocham general secretary D.S. Rawat said though the aviation industry had the potential to growth both passenger and cargo traffic, they were bedevilled by spiralling fuel costs and price wars among them.

“The Indian aviation industry is in dire straits as the airlines are projected to post a combined loss of Rs.15,000 crore this fiscal (2011-12), with Air India alone accounting for half of it,” Rawat observed.

Noting that rising crude oil prices, depreciating rupee and fierce competition have eroded airlines’ ability to raise fares despite passenger growth of 19 percent this year, Rawat said unless they raise fresh funds to run their operations, their very survival would be at state.

“The government should allow foreign airlines to invest in domestic carriers by lifting the ban imposed earlier as overseas investment up to 49 percent is already permitted.

Referring to the benefit of zero import duty enjoyed by foreign companies on maintenance, repair and overhaul (MRO) facilities, while domestic carriers pay about 40 percent tariff on overseas supply of spares and parts, Rawat said the government should come out with a new aviation policy to end this discrimination against Indian carriers.

“In addition, 18.5 percent minimum alternate tax is levied on aerospace special economic zones coming up at Nagpur in Maharashtra, Belgaum in Karnataka and Hyderabad in Andhra Pradesh,” Rawat pointed out.

Growing at a conservative rate of 10 percent, the passenger traffic crossed 140 million in fiscal 2010-11 and is projected to grow nearly four-fold to 540 million by 2025 and cargo traffic is set to touch nine million tones from 2.4 million tonnes in the like period.

“As our unique geographical position offers an opportunity to become a global hub for international airlines, the government must rationalise tax structure to boost the airline industry growth exponentially,” Rawat asserted.

In view of the potential to grow passenger-cum-cargo traffic, private carriers will require huge investments to increase their aircraft fleet to about 1,500 by 2025 from 430 in 2011.

“For achieving the potential targets, a right policy mix, an encouraging tax structure and a healthy regulatory mechanism are the need of the hour,” Rawat added.

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