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Budget 2021: Will COVID-hit aviation sector get a revival package?

BusinessToday.In     February 1, 2021

The crisis-hit aviation sector is pinning its hopes on the Union Budget 2021 to get respite in the form of financial aid and reduction in levies and taxes.   

According to ICRA, the Indian aviation industry is expecting financial support and reduction in levies and taxes in short term to revitalise operations and boost passenger traffic, which include among others, lowering taxes on aviation turbine fuel (ATF) and reducing other levies like airport charges, parking and landing and navigation charges.  

Given that airlines have to currently follow a fare band as per the directives of the Ministry of Civil Aviation (MoCA), the carriers seek relaxations in terms of the fares they can charge. The fixed fare band has limited airlines' ability to charge higher fares.   

ICRA expects Budget 2021 to reiterate focus on improving regional connectivity through "Regional Connectivity Scheme (RCS)" or UDAN. The Budget is also likely to focus on setting up new airports and expanding the existing airport capacities at some key airports to help address current infrastructure constraints faced by airlines, and to improve connectivity with underserved/unserved airports to boost tourism, it said.    

Besides, the government is also expected to undertake other measures to boost tourism like developing more iconic tourist destinations and expanding the e-visa scheme to additional countries.    

In line with the government's increasing thrust on Atmanirbhar Bharat, the Budget could focus on incentivising the maintenance repair overhaul (MRO) sector to retain the MRO activities in the country. It can also prioritise the privatisation of Air India Limited, which has been facing roadblocks over the last several months.   

According to ICRA, Indian airlines is expected to post net losses of about Rs 21,000 crore during the fiscal year (FY) 2021, due to travel restrictions and impact on passenger traffic amid the coronavirus pandemic. The agency has said that airlines would require additional fundings to the tune of Rs 37,000 crore over FY2021 to FY2023 to recover from losses and debt, and has maintained a "negative credit outlook" on the industry.   

In the last Budget, FM Nirmala Sitharaman had allocated Rs 3,797 crore to Ministry of Civil Aviation, 2.62 per cent higher than Rs 3,700 crore which was allocated in the 2019-20 fiscal year. The government had proposed to develop 100 more airports by 2025 to support the UDAN (Ude Desh ka Aam Naagrik) scheme.

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