Cash-strapped domestic airlines have asked the government to declare the civil aviation sectors ‘core infrastructure’ and rationalize taxes and duties on jet fuel, equipment, services and other items.
In their pre-Budget demands presented to finance Minister Pranab Mukherjee, the airlines have strongly favored declaring civil aviation as core infrastructure so that the sector could get tax and other benefits, airline sources said.
In a note presented by their umbrella body, the Federation of Indian airlines , the domestic carriers are understood to have reiterated their demand for reduction of taxes on aviation turbine fuel by designating it as ‘declared good’ to attract a uniform four per cent tax rate across the country.
The FIA, which has been demanding reduction of sales tax on ATF for long, had called for grounding all flights for a day on August 18 last year on the this demand as well as lowering of high airport charges. The call was soon withdrawn.
The airline industry has been suffering massive losses in the past three years, with Kingfisher accounting for over Rs 1,600 crore, Jet Airways and its subsidiaries over 1,000 crore and Air India about Rs 5,000 crore.
The no-frill carrier Indigo and full-business airline Paramount have been the only ones posting some profits. The ATF cost accounts for almost 40 per cent of an airline’s total operating cost. Suggestions have been made that oil companies be asked to reduce the base price of jet fuel sold to the airlines.
As taxation issues primarily concern state governments which earn substantially by imposing sales tax on jet fuel, the Centre has maintained that nothing much could be done on this count as any step would lead to reducing the revenue earnings to the states.
So far as high airport charges are concerned, the Airports Economic Regulatory Authority has been set up to fix and regulate airport tariffs and settle disputes.
The airlines also wanted the government to take steps to reduce the impact of their foreign exchange outgo on account of purchasing aircraft spares, which is a major recurring expense, the sources said.
When the industry was badly hit last year due to the steep hike in global petroleum prices to USD 150 a barrel, the government has helped the industry by cutting five per cent customs duty and asking oil companies to extend credit line to the airlines for six months.
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