‘Over-taxation, lack of infrastructure hamper growth of aviation sector’

The high growth in Indian aviation market and spread of regional services was being hampered by over-taxation and lack of infrastructure in smaller cities, according to a FICCI-KPMG report. “It is a well known fact that the Indian aviation industry is overtaxed and this is being reflected in the industry’s lack of competitiveness at the global level. It is important for India to acknowledge the devastating impact of high taxes,”’ the joint study released on the aviation sector said. According to the report, the Indian civil aviation industry is on a high growth trajectory, although with minor hiccups. The industry has ushered in a new wave of expansion driven by low cost carriers (LCC), modern airports, foreign direct investments (FDI) in domestic airlines, cutting-edge information technology (IT) interventions and a growing emphasis on no-frills airports (NFA) and regional connectivity. The Indian civil aviation industry is among the top 10 in the world with a size of around $16 billion. This is a fraction of what it can actually achieve, it states. The report said Indian carriers were expected to double their fleet size by 2020 to 1,000 aircraft promising a huge opportunity for the maintenance, repair and overhaul (MRO) business. But high taxation could drive away investment in this crucial area, it added. The total manpower requirement of airlines was estimated to rise from 62,000 in 2011 to 117,000 by 2017, the report said. Drawing the attention of the Central and State governments on taking a close look at certain taxes or charges which could be avoided, the report said taxes on aviation turbine fuel and MRO, service tax on air tickets and high airport charges were some of the things that need a re-look. Noting that the current MRO market in India was estimated to be around $700 million, it said at present, merely 5-10 per cent of MRO work for Indian airlines was carried out in India and most of it outsourced to third-party service providers outside the country which was a classic case of scoring self goals. The study strongly pitched for putting in place a strong domestic MRO industry as the domestic fleet was projected to double by 2020. “The government should set up an inter-ministerial task force on MRO to check the outflow of MRO revenue, foreign exchange and jobs,”’ it said. Maintaining that the next generation of aviation growth would be triggered by regional airports, the study said at present, there were around 450 used, unused or abandoned airports and airstrips spread all over the country which could be used to promote air traffic from unconnected regions. “A lot more needs to be done, as several Tier-2/Tier-3 cities are still unconnected or under-served,” the report said. The FICCI-KPMG study strongly pitches for putting in place a strong domestic MRO industry


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