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Travel must be reachable for all, and this is done only through cooperation between governments and all other stakeholders. There must be a relaxation in tax regulations on aviation turbine fuel (ATF) and mandatory route guidelines that prevent low-cost carriers from expanding and growing the market. Though ATF prices have gone down significantly, many States levy VAT, which varies from 4 to 30 per cent. VAT on ATF must be unified across States to around 3-4 per cent. While some States have taken steps towards this, others remain reluctant. Although direct import of ATF is possible, the infrastructure required to facilitate its transportation is dominated by India’s oil marketing companies. The Centre must ensure this infrastructure is shared with private airlines willing to import ATF.
Also, incentives in the form of total waiver of VAT for a three-year period can be provided to operators offering connectivity to remote parts of the country. Relaxation of the 5/20 rule will allow airlines to cross-subsidise their domestic losses with more profitable international ones.
Tax exemptions for MRO operations not only help the country develop a new industry, but also save foreign exchange outflow. Airlines prefer countries such as Singapore, Sri Lanka and Nepal for these services as they are almost 30-35 per cent cheaper than India.
It would be very helpful to develop low-cost carrier (LCC) terminals in which airlines are allowed to invest. Airports around the world are built at much lower costs than in India.
For instance, the Mumbai airport is built at a staggering $1 billion, while the low-cost terminal in Kuala Lampur was built at $30 million. In some European airports, LCC terminals are used by just one low-cost airline. The airline in turn is given concessions on airport charges at Amsterdam’s Schiphol Airport and London’s Gatwick. Bangalore airport, too, is offering incentives to airlines willing to make the city a hub — a step in the right direction.
Chandilya is Chief Executive Officer, AirAsia India
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