 "Centre asks states to cut taxes on ATF")
The Centre has asked state governments to reduce taxes on aviation turbine fuel (ATF) and rationalise taxes on maintenance, repair and overhaul (MRO) activities that can be made more attractive for local players.
Speaking at the launch of low-cost airline Air Pegasus at Kempegowda International Airport (KIA), here on Sunday, Civil Aviation Minister Ashok Gajapathy Raju said, “Taxes are an impediment to MRO activity. I have asked the Finance Ministry to look into it, because, if there is no activity, there is no revenue.”
As of today, most airlines fly their aircraft abroad for MRO activities, to countries such as Sri Lanka, Malaysia and Singapore, because of steep tax rates prevalent in the country today. The opportunity from MRO is estimated to be about $700 million today.
According to Raju, the taxes on ATF are in the range of 1% to 30% today. “It's a dampener to aviation activity,” he added. "Taxing to death is unnecessary. We need to simplify the tax structure to make the sector attractive," Raju said.
Similarly, Raju has written to chief ministers of all states across the country to slash the value added tax (VAT) on aviation turbine fuel (ATF), as 40-45% of the operational cost is incurred on jet fuel by the operators.
“Some (CMs) have responded, but not many of them. The tax on jet fuel ranges from 4-30% across states. To tax them (airlines) to death is not good. The tax on jet fuel needs to be rationalised,” Raju reiterated.
The policy also will address the issue of route dispersal guidelines (5/20 rule) and inter-connectivity, as the prevailing rule does not allow an airline to fly overseas without five-year operational experience and a fleet of 20 aircraft.
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The ministry has identified six airports in Delhi, Mumbai, Chennai, Kolkata, Bengaluru and Hyderabad for developing them as major international hubs for aircraft, passenger and cargo movement.
The Union Minister also said that in the process of connecting the small airports in the southern region number about 30, and small airlines need to be encouraged to connect them. With economic activity picking up, he said, it’s imperative to connect the smaller airports and for this we need small airlines. We need activities on a sustainable basis. “As of now, regional connectivity is the priority for us," Raju said.
The Centre, Raju said, is in the process of developing a policy to encourage small airlines to take in connecting to small airports. "There can be no regional connectivity if small airports are not helped," he said.
Before flagging off the flight, Raju said, “The new routes with a regional focus will help local businesses and boost tourism. We see a huge potential for both business and leisure travel.”
Raju took the first flight to Hubballi from the KIA of the startup airline Air Pegasus which is a venture of Bengaluru based ground handling firm Decor Aviation.
Speaking at the launch function, Raju said, “We need to involve the private sector more in developing the aviation sector.”
To Hubballi, first
India’s newest addition to the low-cost airline landscape in the country, Air Pegasus launched its maiden service to Hubballi from Bengaluru using a 66-seater ATR-72 turboprop aircraft.
While Hubballi is a significant commercial centre in northern Karnataka, with a cluster of small and medium scale industrial units, another attraction is the fact that its twin city Dharwad is an educational centre of the state.
Air Pegasus is the ninth carrier in the country and third new airline to launch service after Air Asia and Vistara in the last 12 months.
“We will operate a daily flight between Bengaluru and Hubbali in the mornings. The timings will be convenient for taking connecting flights to other cities from Bengaluru,” said Shyson Thomas, managing director, Air Pegasus here while addressing the media just before the launch of the service.
The airline today also announced that it will launch a daily service to Thiruvananthapuram from Monday and it will be an ATR aircraft as well.
The company has invested Rs 100 crore on the regional airline. The airline plans to add three more 66-seater ATR aircraft to the two such aircraft it has by December.
“Kadapa in Andhra Pradesh will be our third destination from Bengaluru as it has no air connectivity. We will also launch a daily Chennai-Tuticorin and Tuticorin-Coimbatore services in Tamil Nadu when we get the additional three ATRs,” Thomas asserted.
Using the hub-and-spoke model, the airline plans to operate daily service to other cities and towns in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana over the next two years.
Though the southern region has 30 functional airports, all of them are not connected yet as full-fledged, budget carrier and other low-cost airlines have been operating between metros and cities, leaving tier-two and tier-three cities or towns unconnected.
“We plan to soon connect Bengaluru with Belagavi and Mangaluru, Chennai with Madurai. and Bengaluru with Kochi and Rajahmundry in Andhra Pradesh,” Thomas added.