Formation of Civil Aviation Authority crucial: Survey

NEW DELHI: Liberalised FDI norms have the potential to put the aviation sector on the growth track but taxation issues are major impediments for the industry, a survey has found.

The industry termed formation of a Civil Aviation Authority a crucial step for development of Indian civil aviation sector, but said poor infrastructure at airports, land acquisition and environmental clearance were major roadblocks impeding the development of low cost airports in tier II and tier III cities, a survey by FICCI-EY on Civil Aviation said.

About 90 per cent of those surveyed opined that relaxing FDI norms was a positive step towards the revival of the Indian aviation market and it would help bring in the required capital and expertise, achieve economies of scale and drive competition.

59 per cent of the respondents recognised recent measures by the government like allowing 49 per cent FDI by foreign carriers in Indian airlines, direct import of fuel as positive measures, while stressing on the importance of implementation of these steps.

However, around 57 per cent respondents said "high taxation" and "policy regime" were major deterrents to growth of aviation industry.

"Lack of access to finance, shortage of trained manpower, rising fuel costs, infrastructure bottlenecks, high operating costs and lack of incentives were other issues stalling the growth of aviation industry in India," it said.

The industry felt that Indian players lack level playing field when compared to their foreign counterparts,specifically with respect to taxation on ATF, MRO, in which they see huge opportunity.

They said the government must ensure level playing field to Indian carriers by rationalising tax structure for MRO industry and central and state governments should work in tandem to enhance regional connectivity.

Asking for review of bilateral agreements to provide a level playing field to Indian carriers, they also demanded according aviation fuel the status of "declared good" that carries a uniform tax of four per cent throughout the country.

Holding poor infrastructure responsible for congestion at airports, leading to increase in airline operating cost, those surveyed said the development of low-cost airports in tier II and tier III cities was taking place at a slow pace (according to 49 per cent of respondents).

"Further, more than 90 per cent of the respondents stated that delays involved in land acquisition and environmental clearances were key issues impeding greenfield airport development in the country.

"These clearances add to the project costs and thus impact financial viability of projects," they opined and suggested single window clearance for airport projects.

They suggested that government expedite formulation of Civil Aviation Authority as an autonomous body with operational, financial and administrative independence and said that airlines should be accorded infrastructure status and a transparent and forward looking policy on ground handling services must be put in place.