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Airlines seek debt rejig and tax-breaks

As domestic airlines look at the  RBI's debt restructuring plan as a ray of hope, Air India (AI) seeks more cash infusion from the government to see itself out of the red.

Mail Today Bureau        Last Updated: February 21, 2011  | 10:04 IST

Though India's domestic airline companies have made a fragile recovery and witnessed a rise in profits for the first time in three years, with their collective debt soaring to over Rs 60,000 crore, the sector's wish-list for inclusion by the finance minister in the upcoming budget includes tax reliefs and a debt restructuring plan.

As domestic airlines look at the Reserve Bank of India's (RBI) debt restructuring plan as a ray of hope, Air India (AI) seeks more cash infusion from the government to see itself out of the red.

Not to be left behind airport developer, Airports Authority of India (AAI) too, has sought more funds to meet the immediate need for developing airports in order to keep pace with the developments in the sector.

The industry also wants the FM to liberalise foreign direct investment (FDI) in aviation and put aviation fuel under the 'declared goods' category as it will help reduce the tax rates from the current levels of around 24-25 per cent. Aviation fuel amounts to over 40 per cent of airlines' operational cost.

"India allows 100 per cent FDI in almost all mass rapid transport systems. However, foreign ownership in airlines is restricted to 49 per cent and nil investment in Indian carriers.

The government should liberalise FDI in aviation. This restriction limits the resources and could lead to an investment gap," said Ankur Bhatia, who heads the Bird Group, a technology provider for aviation and travel services.

Also, aviation fuel prices which were hiked by a further 4.5 per cent is putting more pressure on the airlines, he said adding that this has resulted in increase in the airfare. " We hope the government terms ATF (aviation turbine fuel or aviation fuel) as 'declared goods', as it will help reduce the tax rates from the current levels of around 24-25 per cent," he said.

"Also, regional aviation needs to be promoted aggressively. A number of airlines are ready to take off their regional carriers from many parts of the country, but lack of developed airports is blocking the growth," he added.

While seeking more funds, the AAI has told the government that the aviation sector in India needs rapid upgradation of airport infrastructure.

The Associated Chambers of Commerce and Industry of India (Assocham) has urged the government to provide fogproof equipment at the airports.

It has submitted a note to the government suggesting a special budgetary provision to avoid heavy losses that airlines incur by diverting or cancelling flights during foggy winters.

It has asked the government to provide exclusive viability gap funding mechanism for encouraging private investment in regional airports. "While the initial corpus can be made through a budgetary provision, the fund could be financed or augmented by monetising land owned by AAI or government at other commercially attractive airports," it said.

"We have also called for concession on airport fees and other charges for airlines, with a sunset clause if required, should be provided to enhance connectivity to Tier-II and Tier-III cities," the Chamber said.

The industry feels that there are huge challenges enroute to improving the infrastructure at airports as well as for other activities related to aircraft, ground handling and safety.

Courtesy: Mail Today

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