New Delhi, July 20, 2021: The civil aviation industry, facing huge losses due to the ongoing pandemic, is betting on newly-appointed Union civil aviation minister Jyotiraditya Scindia to accelerate key reforms long sought by the sector, said senior industry representatives.
The industry has been demanding a cut in taxes on jet fuel to make it more affordable and the removal of capacity and fare caps, which airline executives believe will play a major role in the long-term viability of the sector.
Taxes on jet fuel in India are one of the highest in the world and should be reduced to facilitate the recovery of the sector, a senior official at a Gurugram-based airline said on condition of anonymity. The official said jet fuel should be immediately brought under the ambit of the goods and services tax.
“The cap on fares and capacity should be removed and the government should allow free-market economics to play out (in the sector) for it to be able to thrive,” the official said.
To be sure, these are not new demands by the industry and a final decision to reduce taxes rests with the finance ministry. However, Scindia’s appointment has rekindled hopes of a speedy approval to the industry’s requests.
“We are hoping that a young, modern and tech-savvy minister will realize the importance of technology, competition from UAE and take policy decisions to benefit the sector,” said Sanjay Julka, chief executive officer, technical, Club One Air according to the reports published in livemint.com.
“We are expecting rules and regulations to be brought on a par with world standard as Directorate General of Civil Aviation (DGCA) regulations are still not on a par with that of US, EU regulators. Also, we haven’t kept pace with technology changes, and organizations like DGCA and Airports Authority of India could do with better response and accountability,” Julka said. He added that former aviation minister Hardeep Singh Puri, who now heads the petroleum ministry, could help push for bringing jet fuel under GST as he understands the challenges faced by the aviation sector. “This is the right time to achieve these changes,” he said.
Scindia, who joined the Bharatiya Janata Party (BJP) from the Indian National Congress (INC) in March 2020, is the son of late INC politician Madhavrao Scindia, who too held the civil aviation portfolio under former prime minister P.V. Narasimha Rao’s government between 1991 and 1993.
Meanwhile, General (retired) V.K. Singh has been appointed as the minister of state for the civil aviation ministry in the latest cabinet reshuffle.
Scindia’s appointment comes at a time when the sector has been adversely impacted by the pandemic with curbs on domestic flight capacity and a continuing ban on scheduled international passenger flights. He faces the challenge of getting the ailing sector back on its feet.
Under his stewardship, the government will hope to complete the divestment of national carrier Air India by this fiscal-end, which his predecessor Puri had aimed to achieve.
“However, the reality is that the second wave has increased industry challenges significantly and will potentially increase the liabilities of Air India to around an estimated $20 billion by FY2025. Hence, the equation from an investor’s perspective is a potential liability of around $20 billion before the business turns around,” aviation consultancy firm Capa India said in its recent Airline Outlook FY22.
“The government must, therefore, keep this massive financial burden in mind and consideration should be given to making changes to the terms and conditions,” it added.
