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Budget 2021: What does aviation industry want?

BusinessToday.In     February 1, 2021

Aviation sector was one of the most badly hit sectors due to coronavirus in 2020. As many domestic and international routes still remain under restrictions, airlines are facing massive losses every day. Amid these trying times, the sector is expecting serious relief measures from Finance Minister Nirmala Sitharaman's budget today.

As per key recommendations, bringing aviation turbine fuel under the Goods and Services Tax (GST) regime is the topmost demand. The airline companies want reduction in airport charges to attract more customers. As the country enters the recovery mode after months of lockdowns and economic losses, the airlines feel it's important that the Centre takes people-friendly measures to revive the industry.

Other key demands are cut in overflight fees and excise duty. Airlines have also urged the government to extend the lower rate on withholding taxes for another year. Demand for a lower income tax rate structure for travel companies has also been made to the finance minister. The industry has also demanded the Centre to keep GST rates on travel by both private and commercial flights at 5 per cent to reduce cost of travelling for those who don't get GST refund benefits.

When the pandemic started spreading across the country, all scheduled international flights and domestic passenger flights were suspended from March 23 and March 25, 2020, respectively. After two months of no activity, scheduled domestic flights were restarted in a limited manner from May 25.  

All major airlines in India faced losses throughout the year. Many laid off hundreds of employees, sent them on leave without pay, or cut their salaries.

IndiGo incurred net losses of Rs 2,884 crore and Rs 1,194 crore in Q1 and Q2 of this fiscal, respectively. SpiceJet posted net losses of Rs 600 crore and Rs 112 crore in Q1 and Q2, respectively.

Some special international passenger flights to around 24 nations were allowed under Vande Bharat Mission after July but scheduled international flights are still suspended. New coronavirus strains emerging in many European countries have even delayed the possibility of resumption of flights further.

Aviation market intelligence firm CAPA India projected in October that the Indian aviation industry will lose a combined $6-6.5 billion in FY21, of which airlines will account for $4-4.5 billion.  

Coronavirus has even thrown a spanner on the government's plan to sell Air India. The disinvestment of Air India is yet to enter its second stage. The Centre is yet to announce the names of the qualified bidders for the state-owned loss-making airline. In stage II, shortlisted bidders will be given a request for proposal (RFP), post which a transparent bidding process will take place.  


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