Amber Dubey, partner and India head of aerospace and defense at global consultancy KPMG has listed top 10 pre-budget expectations of the airline industry.
1. Notify ATF as a 'declared good' at the earliest. It is much more prudent to generate tax from final goods and services than a raw material (ATF). ATF in India is 55-60% costlier than the Gulf and Asean region. The cascading effect of ATF taxes have brought ruin to the airline sector. ATF should have a uniform levy of 4% across India.
2. Announce a task force to look into practical options for privatization of Air India. Else Air India will continue to bleed under increasing competition, falling market share and increasing costs. The taxpayers funds can be used for development of the aviation sector as a whole, and to provide some compensation to states for forgoing VAT on ATF.
3. Provide a 10 year tax holiday (covering Customs, Excise and Service Tax) to aerospace manufacturing and MRO sector. Encourage states to extend the tax holiday to local VAT. This should not be mistaken as a 'tax loss' since there's negligible manufacturing or MRO activity in India and hence there's hardly any tax collection. The creation of jobs, saving of foreign exchange and the tax on consumption by employees would be several multiples of the notional loss.
4. Allow private airport operators to issue tax free infrastructure bonds to the public. Investments in these bonds should be allowed for deduction under section 80CCF of the Income Tax Act.
5. Upgradation of existing airports should be eligible for Section 80IA benefits. Essential airport infrastructure like ground handling, fuel farm etc should also be covered under the same.
6. Allocate Rs 10 billion as a seed funding for the Essential Air Services Fund (EASF). EASF to provide VGF funding for no-frills-airports (NFA) and air connectivity in Tier 3-4 locations based on a thorough feasibility analysis.
7. Provide see funding of Rs 2 billion to establish 20-25 heliports at important tourist, port and mining locations. Balance to come from state governments and private operators.
8. Allocate Rs 5 billion for modernization of Air Navigation Services (ANS). The ANS training centre at Allahabad should be expanded to produce trained ATC officers for not just India but also for the global aviation market.
9. Identify funding requirements of DGCA to ensure its financial autonomy. Government of India may provide 50% of the same as seed funding. Balance to come from service charges levied on issuing of licenses to airports, airlines and other stakeholders.
10. Allocate Rs 10 billion to establish set up four National Aviation Universities (NAU) in the country and to support upgradation of AME training centers across the country.
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