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Union Budget 2015: Aviation industry seeks sops for survival

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Union Budget 2015: Aviation industry seeks sops for survival

According to the report, the Indian civil aviation industry is on a high growth trajectory, albeit with minor hiccups.   

“The industry has ushered in a new wave of expansion driven by low cost carriers (LCC), modern airports, 

foreign direct investments (FDI) in domestic airlines, cutting-edge information technology (IT) interventions and a growing emphasis 

on no-frills airports (NFA) and regional connectivity,” the report said adding that the industry is amongst top 10 in the world with 

a size of around USD 16 billion. However, the aviation industry is facing its own set of challenges.  

Present Challenges/scenario: Notwithstanding the extraordinary traffic growth over the past decade, with addition of new airlines like Vistara 

and Air Asia in the Indian skies last year, the situation is still grim for the sector. Most of them are staring at huge losses. 

National carrier Air India is sitting on a pile of massive debt, amounting around Rs 44,000 crore as of FY14. Kingfisher Airlines has been grounded over payment default,

 while SpiceJet is hoping for a turnaround post a change in management control.

After posting seven quarters of consecutive losses, Jet Airways has finally managed to report an operating profit of Rs 3 crores in its third quarter ended December on 

the back of falling fuel costs and increased revenues. Moreover, the country has fewer airports and even lacks on aviation safety infrastructure.  

Industry expectation: The last Budget announced schemes for development of new airports in Tier I and Tier II cities. However, the industry 

has been seeking more sops.    Union Minister of Civil Aviation, Ashok Gajapathi Raju, in a pre-Budget meet with the representatives and stakeholders 

of the industry, on February 3, held discussions on the problems plaguing the sector.   Issues pertaining to updation of standards for security 

equipment, establishment of a “green” channel for MRO equipment and allocation of appropriate funds for air navigation facilities were discussed 

among other subjects.  

The industry made several suggestions for the promotion of MRO sector, including removal of service tax, reducing VAT on MRO activities,

 10-year tax holiday, abolition of central excise duty on MRO component etc.   If these measures are taken, it was represented, 

 there would be creation of one lakh jobs with more than a billion dollar revenues to the country on account of MRO activities.

 The stakeholders also requested to treat ATF as a “declared goods” so that VAT on ATF could be reduced to 4 percent. 

 This would make airlines more viable as ATF constitutes more than 45 percent of the cost.   

 The airlines representatives have also sought infrastructure status to enable access to funds with lower rate of interest through 

 external commercial borrowings. The industry stakeholders also made suggestions with regard to dedicated air cargo stations and general 

 aviation as a necessary force-multiplier.

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