In keeping with the current government’s apparently pro-investment, pro-business leanings, there is a lot of expectation from the forthcoming Budget, says Phee Teik Yeoh, CEO of Vistara, the newly launched Tata Sons-Singapore Airlines joint venture. This more or less sums up what the domestic aviation industry expects of Budget 2015.
Aviation firms are specifically looking for definitive steps to further incentivise the sector and enhance its global competitiveness, says Phee Teik. “A viable tax structure for airport infrastructure and Maintenance Repair and Overhaul (MRO), along with reduced state taxes, will boost the Modi government’s Make in India initiative,” he says.
Amber Dubey, Partner and Head - Aerospace and Defence, KPMG, suggests establishing an independent Aeronautics Commission with a budget of ₹500 crore. “This Commission should be headed by a professional and report directly to the Prime Minister. Its mandate should be to facilitate cutting-edge research and aeronautical manufacturing in the country,” he argues.
He further wants permission for private sector airport operators to issue tax-free infrastructure bonds to the public with such investments being allowed income-tax deductions. The other items on the wish list for Budget 2015 are relatively older and have been brought up time and again. Topping this is giving declared goods status to aviation turbine fuel (ATF).
“The cascading effect of ATF taxes has brought ruin to the airline sector. ATF should have a uniform levy of 4 per cent across India,” says Dubey.
The Civil Aviation Ministry, meanwhile, has sought ₹1,000 crore from the Finance Ministry to set up an Air Services Fund to subsidise services to remote parts of the country.
Fillip for MROsVivek Gour, MD and CEO of MRO player Air Works, hopes the Budget will take steps to boost the domestic MRO industry by addressing issues on royalty levied by airport operators, among others.
Gour points out that offering aircraft maintenance services in India attracts 12.36 per cent service tax apart from 12-15 per cent VAT, apart from the 13-20 per cent royalty levied by airport operators.
“This makes MRO activity here about 25-35 per cent more expensive than in the rest of the world. If our MRO purchases were to be met locally it would create 10,000-12,000 skilled jobs,” he says.