Allocation of Rs 1,000 crore to set up an Air Services Fund, addition of aviation turbine fuel in the declared goods category and exemptions in taxes for the maintenance, repair and overhaul (MRO) industry are among the major proposals being put up by the civil aviation ministry for Budget 2015-16.
Demands for an essential air services fund, considered earlier in the previous UPA regime, has come forth again with the NDA government pushing airlines to enhance air connectivity to unserved and underserved towns and cities.
A senior official in the civil aviation ministry said, “We have had a meeting with over 30 industry stakeholders. Airlines have requested that an air services fund be set up to subsidise operations in remote and regional areas.”
The proposal will now be put before the finance ministry for consideration.
Besides, the civil aviation ministry has also decided to recommend in its Budget proposal that aviation turbine fuel be included in the list of declared goods. The measure, if accepted, will entail that a uniform tax of 4 per cent is levied on ATF across the country.
The ministry is additionally pushing for infrastructure status to being accorded to airlines, which would enable them to access capital through external commercial borrowings at cheaper rates.
The civil aviation ministry is also pushing for tax exemptions for the MRO industry. MRO in India is estimated at $700 million but only 5-10 per cent of the business is carried out within the country.
“If we waive the service tax and VAT, maintenance cost in India will become 15 per cent cheaper in India compared to Singapore and Sri Lanka. The industry, if supported, has the potential to create 100,000 jobs,” said the official.
Indian carriers today prefer to get their fleet serviced in places like Colombo, Singapore, Malaysia and Dubai due to the prevalent tax structure in the country, which makes MRO operations up to 35 per cent costlier.
The financial stress in the industry made even GMR look at selling stake in the aircraft maintenance facility it jointly owns with Malaysian Aerospace Engineering Sdn Bhd, the Hyderabad-based MAS GMR Aero Technic Ltd, added another industry insider.
If taxes are rationalised, industry analysts estimate the MRO business in India will double in size to clock business of $1-1.5 billion by 2020, given its geographical position.