Rationalisation of ATF taxes to bring down airlines' operating costs, says study
Updated: Nov 14, 2015 11:49:37am
New Delhi, Nov 14 (KNN) Implementation of a reduced and uniform taxation structure on air turbine fuel (ATF) across all states will bring fuel costs largely in line with global levels and improve financial health and competitiveness of airlines by reducing their operating costs, noted a study.
“Reduction in ATF costs would spur aviation related activities and have a multiplier effect in terms of job creation and revenue generation in related industries like tourism, trading and manufacturing,” said the study titled ‘Indian Civil Aviation: At the cusp of taking off,’ conducted by ASSOCHAM jointly with Yes Bank.
It suggested that rationalisation of value added tax (VAT) should be consensual, involving deliberations with respective state governments.
“Reduction in VAT on ATF implemented by states like Andhra Pradesh, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha and West Bengal during 2013-14 has shown direct benefits resulting in increased airline activities for that fiscal year, as such it can also be adopted by high consumption centres like Delhi and Mumbai,” noted the study.
A more conducive fiscal environment by the states for aviation sector will contribute immensely in local economic development, it said.
It has also been suggested to abolish the regulations like ‘150 km rule,’ for developing new airport which is not in sync with actual demand situation.
“Major cities would require development of multiple airports as burgeoning population, growing economy and rising middle class with higher disposable incomes would put massive strain on existing airports,” said the study.
It also said that there is a need to replace the 5/20 rule to provide long-term financial security and international quality standards to the domestic airline operators.
The paper has recommended for according ‘infrastructure,’ status to the aviation sector as it would help fuel growth in the sector with advent of cheap and long-term funding through issuance of tax free bonds, raising of low-cost external commercial borrowings and others for industry operators.
The government should separate two primary functions of the Airports Authority of India (AAI) i.e. creation and maintenance of airport infrastructure and air navigation services in order to de-burden the organisation and achieve operational efficiency and commercial viability, it said.
It suggested that existing regulations vis-à-vis importing aircraft parts, tools, supplies and equipment must be rationalised to include simplified and standardised customs.
Initiatives must also be taken for setting up new air freight stations and full-fledged operations of existing air freight stations for speeding up movement of goods with immediate effect, added the study. (KNN Bureau)
“Reduction in ATF costs would spur aviation related activities and have a multiplier effect in terms of job creation and revenue generation in related industries like tourism, trading and manufacturing,” said the study titled ‘Indian Civil Aviation: At the cusp of taking off,’ conducted by ASSOCHAM jointly with Yes Bank.
It suggested that rationalisation of value added tax (VAT) should be consensual, involving deliberations with respective state governments.
“Reduction in VAT on ATF implemented by states like Andhra Pradesh, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha and West Bengal during 2013-14 has shown direct benefits resulting in increased airline activities for that fiscal year, as such it can also be adopted by high consumption centres like Delhi and Mumbai,” noted the study.
A more conducive fiscal environment by the states for aviation sector will contribute immensely in local economic development, it said.
It has also been suggested to abolish the regulations like ‘150 km rule,’ for developing new airport which is not in sync with actual demand situation.
“Major cities would require development of multiple airports as burgeoning population, growing economy and rising middle class with higher disposable incomes would put massive strain on existing airports,” said the study.
It also said that there is a need to replace the 5/20 rule to provide long-term financial security and international quality standards to the domestic airline operators.
The paper has recommended for according ‘infrastructure,’ status to the aviation sector as it would help fuel growth in the sector with advent of cheap and long-term funding through issuance of tax free bonds, raising of low-cost external commercial borrowings and others for industry operators.
The government should separate two primary functions of the Airports Authority of India (AAI) i.e. creation and maintenance of airport infrastructure and air navigation services in order to de-burden the organisation and achieve operational efficiency and commercial viability, it said.
It suggested that existing regulations vis-à-vis importing aircraft parts, tools, supplies and equipment must be rationalised to include simplified and standardised customs.
Initiatives must also be taken for setting up new air freight stations and full-fledged operations of existing air freight stations for speeding up movement of goods with immediate effect, added the study. (KNN Bureau)
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