The Naresh Chandra committee on civil aviation has pitched for foreign airlines picking up stakes in domestic and international scheduled carriers, besides recommending an increase in the foreign direct investment (FDI) limit to 49 per cent from 40 per cent.
The committee, which presented the first part of its report to Civil Aviation Minister Rajiv Pratap Rudy today, said the government could directly divest 49 per cent to foreign players in Air-India and Indian Airlines.
Alternatively, it could place the shares of these airlines with domestic financial institutions and foreign institutional investors, which should be allowed to appoint a management team of their choice and exit at their volition.
The report also said private domestic carriers should be allowed to fly on international sectors. They should be permitted to offer third-party ground-handling services, it added.
Though the committee has not favoured an open sky policy, it has suggested a liberalised bilateral policy.
To make domestic air travel economical, the committee has suggested that inland air travel tax, foreign travel tax and passenger service fee be replaced by a sector-specific cess of 5 per cent of the air fare.
The cess may find its way into a non-lapsable Essential Air Services Fund, outside the Consolidation Fund of India, to be used to subsidise domestic airlines for operating on non-economical Category-II routes, it has said.
The committee has asked the Centre to substantially lower the excise duty and the sales tax on aviation turbine fuel.
While aviation turbine fuel carries a 16 per cent excise duty, the sales tax levied by different states varies between 4 per cent and 39.5 per cent.
The Centre may categorise aviation turbine fuel as
