Govt moots tax sops, levy on air tickets in aviation policy

Fliers may have to pay 2 per cent more towards a new regional connectivity levy proposed under the much-awaited draft civil aviation policy, which also proposes various tax sops and over 50 per cent FDI for the Indian carriers.
Among other measures, the policy proposes setting up of no-frills airports and providing viability gap funding for airlines for regional connectivity. Further, fare would be capped at Rs 2,500 for one-hour flight under regional connectivity scheme for places that are unserved currently.
In a possible game changing move, the Ministry has also pitched for over 50 per cent FDI in domestic carriers in case open skies policy is implemented. Under open skies policy, overseas airlines can operate unlimited number of flights into and out of India. At present FDI limit is 49 per cent.

The policy, which was unveiled here today by the Civil Aviation Ministry and was described as 'progressive' by leading carriers IndiGo and SpiceJet, however did not provide a finality on the fate of the contentious 5/20 norm that makes it mandatory for airlines to have minimum five years of flying experience and 20 aircraft to fly abroad.
The Ministry has now sought comments on three options -- abolish the 5/20 norm completely, continue with it, or link the overseas flying rights with domestic flying credits.
The Ministry said the policy, which has been in making for almost a year after issuing the original draft, is aimed at taking "flying to the masses". The proposed 2 per cent levy on all domestic and international tickets can bring in Rs 1,500 crore a year that would be used to expand regional routes.

The final policy is expected to be decided in a couple of months after looking into comments on all draft proposals. Public comments have been invited over the next three weeks, after which inter-ministerial consultations would be held.

Noting that the revised draft policy has been rolled out after wide range of consultations which were "never done before", Civil Aviation Minister Ashok Gajapathi Raju said, "we have proposed. Let us get the feed back."
Civil Aviation Secretary Rajeev Nayan Choubey said, "The draft policy is in line with the Prime Minister's directives that it (policy) should promote aviation in a big way and take flying to masses."

"The government expects about Rs 1,500 crore annually from charging 2 per cent levy " Choubey added.
To make MRO (Maintenance Repair, Overhaul) cheaper, the government has proposed to exempt such activities from service tax net and not levy any VAT. The policy also envisages making India an Asia hub for MRO business.