14 Oct Make India airline-friendly: IATA
Tony Tyler, Direc tor General and CEO, IATA, spoke of the challenges faced by players in the Indian aviation sector and highlighted priority areas to reduce airline operational costs in India.
Delivering the keynote address at the Aviation Day India organised by IATA together with India’s Ministry of Civil Aviation (MoCA) and the Confederation of Indian Industry (CII), Tyler, complimented Prime Minister Narendra Modi and his Cabinet for focusing on the aspect of ease of doing business in the country.
He further elaborated,“Already aviation and aviationrelated tourism support 7 million Indian jobs and $23 billion of India’s GDP. But there are immense challenges which
must be overcome — as seen in the sector’s financial performance While demand growth is robust and some airlines are generating profit, sector-wide losses for India are still expected to exceed $1 billion this year. Onerous regulation and processes, debilitating taxes and expensive infrastructure are holding back the industry’s ability to deliver greater economic benefits to India.
In his address, Tyler highlighted three priority areas where work is needed to reduce costs in India:
Reducing the tax burden
The application of Service Tax should be aligned with a principle that it does not apply to services rendered outside of India, including those for overflight charges, global distribution systems, extra baggage fees and international tickets. He also highlighted that
the incoming GST regime should also zero-rate international air transport services in line with OECD guidelines, the need to follow international treaties that protect airlines from double-taxation on income and the need to avoid double-taxation within India in situations where airlines are effectively taxed on taxes collected.
Competitive Fuel Pricing
State taxes on jet fuel can be as high as 30 per cent.Tyler urged the government to grant “declared goods” status for jet fuel which would limit taxation.“The decision to introduce competition in jet fuel supply at key airports needs to be followed up with open access to the pipelines that get fuel to the airport in order for efficiencies of a liberalised market to be realised,” said Tyler.
Let AERA be independent
Tyler highlighted the importance of allowing the Airports Economic Regulatory Authority (AERA) to do its work independently. He called for action in three areas: Protect the independence of AERA and the principle of a “single till” for airport charges in light of stock exchange filings which show that the Ministry of Civil Aviation had instructed AERA to use a hybrid till for its “independent” determination of airport charges at Hyderabad. Carefully assess the proposed privatisations of Jaipur, Kolkata, Ahmedabad and Chennai to ensure that the “single till” principle is maintained and that the privatisation terms are appropriate to the level of development at the airports. Significant public investment in these airports should be considered in a cost/benefit analysis aimed at determining if the public interest would be best-served by a concession contract or a management
“Regulation is also holding back the development of the sector. Well-intentioned regulations, but which are inconsistent with global standards, make doing business in India very difficult for the airlines. India imposes rules and requirements that are not seen anywhere else,” said Tyler.