Govt might cut import duty of small aircraft

Thanks to the response, import duty on aircraft may be reduced, says Civil Aviation Secy

Buoyed by a positive response from operators, the Civil Aviation ministry is looking to eliminate the final hurdles in the government’s ambitious regional connectivity scheme. After opening the window for auctioning of routes, the ministry has received registration from 60-odd operators, many of who will enter the sector for the first time.

“There has been a positive response from the prospective bidders; around 60 operators have registered for the bidding process for more than 600 routes, which primarily connects smaller cities with big hub airports in the country,” Civil Aviation Secretary Rajiv Nayan Choubey told Business Standard.

Although Choubey declined to name the operators, industry sources have confirmed that the 60 operators include the likes of Captain Gopinath of Air Deccan fame and Viking Ventures, which owns the famous King’s Beer brand. Steel tycoon Naveen Jindal has also registered for the bidding process through its aviation venture and looking to bid for routes mainly in central India.

According to the secretary, the government and the stakeholders have sat across the table to iron out the final hurdles challenges remain on the leasing of aircraft. This is due to the fact that most of the operators are unknown, which does not give confidence to the lessors. “Getting small aircraft on the lease is a challenge as international lessor companies are hesitant to give planes to players who are not established in the market,” he said.

To smoothen the process, India is going to implement laws under the Cape Town convention making it easier for lessors to repossess aircraft. India is a signatory to the convention. Further, the ministry is approaching the finance ministry to reduce taxation on the import of aircraft. “We have asked the finance ministry to permit import of aircraft at minimum import duty of two to three per cent, if the operator gives an undertaking that the aircraft is only for scheduled or non-scheduled services,” said Choubey. Currently, operators importing aircraft for private use pay import duty as high as 18 per cent.

Business Jet Operators Association, the lobby group of non-scheduled operators, said that with fuel price likely to shoot up, rationalising duty structure for all public air transportation system inclusively by not treating non-scheduled operators differently. This will lead to easing import of aircraft and maximising utilisation of existing fleet to boost regional connectivity, as envisaged in the National Civil Aviation Policy, 2016.

As of now, established players other than state-owned Air India have not shown any interest in the scheme. Choubey said the scheme is completely market-oriented; hence, the government has no role to force any player. “When you have to fly for around 13 hours a day and across four to five unserved airports, it is essential that you take decisions wisely; you chose the network carefully; it is for the airlines to decide,” Choubey said.