ASSOCHAM

CIVIL AVIATION SECTOR

Critical issues:
1. Create an inter-ministerial task force for making India a leading global aviation
hub. The task force should have JS level officers from finance, home,
external affairs, tourism, environment, defense, commerce and industry,
highways and railways. India has to be packaged and presented as a world
class destination a la Singapore and Dubai. We have to evaluate every
process and experience that an international tourist into India goes through
from entry to exit. Just building great airports will not make India an aviation
hub. The task force should meet once every month and create measurable
output. Should be headed by Secretary, Ministry of Finance since the
ultimate impact is on national wealth and employment generation.
2. Notify ATF as a declared good at the earliest. It is much more prudent to
generate tax finished goods and services than the raw material (ATF), else
the cascading effect of taxes completely distorts the competitiveness of the
sector. ATF should have a uniform levy of 4% across India.
3. Promote the domestic MRO industry by removing all taxes and providing it a
'deemed export' status. All Indian carriers find it cheaper to fly empty aircrafts
and crew to foreign locations for repairs than to do it in India. This is a
national tragedy. High tax rates have led to negligible tax revenues. The jobs
opportunities in this labor intensive sector have been lost to countries like
Singapore, Malaysia, UAE, Sri Lanka etc. This should be treated as an
import substitution measure than a tax rebate. The resultant jobs and
development of ancillary industries will create more tax revenue for the
government
4. Facilitate cargo growth by way of process reforms, greater automation, 24x7
Customs operations and development of Air Freight Stations (AFS). Transshipment cargo is a low hanging fruit. Nearly 30% of India's cargo (by value)
goes by air. We can't neglect it any further.

Important issues:
5. Develop investor friendly airport tariff policies to encourage greater private
sector investments in airports. There is a significant difference of opinion
between the AERA and the airport operators. Most of the AERA decisions
have been challenged in court. All this is affecting investor sentiment. Will
hurt the prospects of green-field airport projects like Navi Mumbai, Goa and
Kannur etc.
6. Allow FDI by foreign airlines into Indian carriers for greater fund infusion,
global connect and techno-managerial expertise. May also create new airline
companies. Enhanced competition will help passengers.
7. Promote development of low cost airports in Tier 2/3 cities. Creation of an
innovative low cost airport model, establishment of the Essential Air Services
Fund (EASF) to provide viability gap funding and implementation of investor
friendly policies are key.
8. Facilitate growth of General Aviation by way of a clear policy, tariff structure
and operating procedures. Charter flight operations have to be encouraged
to boost tourism.
9. Adopt a policy of non-interference in ticket fares. These should be left to
market forces. Choice of mode of travel is discretionary. If fares are
excessive, people will shift to other modes. Video-conferencing is a hidden
threat to airlines.
10. Review the 5 year/20 aircraft rule for global operations by Indian carriers.
These should be reduced to 1 year / 5 aircraft threshold.
11. Facilitate growth of world-class aviation education facilities in India by way of
attractive fiscal and monetary incentives; and easy entry of global players.