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India has the potential to become the third largest aviation market by 2020 and the largest by 2030, said a report by FICCI-KPMG.
There is large untapped potential for growth due to the fact that access to aviation is still a dream for nearly 99.5% of the country's population, said the report released at 'Indian Aviation 2014' Thursday.
According to the report, the Indian civil aviation industry is on a high growth trajectory, albeit with minor hiccups.
"The industry has ushered in a new wave of expansion driven by Low Cost Carriers (LCC), modern airports, Foreign Direct Investments (FDI) in domestic airlines, cutting edge Information Technology (IT) interventions and a growing emphasis on No-Frills Airports (NFA) and regional connectivity," said the report.
One of the top 10 in the world, the size of India's civil aviation industry is around $16 billion. However, the paper says, this is a fraction of what it can actually achieve.
"In view of the enormous growth prospects of air traffic and substantial investment projections, Indian aviation market offers significant long term opportunities for global aviation players," said Sidharth Birla, president of FICCI.
The report notes that the next generation of aviation growth in India will be triggered by regional airports. At present, there are around 450 used, unused or abandoned airports and airstrips spread all over the country.
It pointed out that many Indian states, especially in Eastern India, have started taking pro-active measures to promote air connectivity. These initiatives include reduction in Sales Tax on ATF, development of no-frills airports, promotion of aviation academies and supportive policies for airlines and tourism.
It praised West Bengal for becoming the first large state in the country to declare zero% sales tax on ATF at its regional airports and 15% Sales Tax on ATF used by additional flights started at its metro airport in Kolkata.
"A lot more needs to be done, as several tier 2/3 cities are still unconnected or underserved. These involve relaxation on regulations, revising the security requirements, allowing domestic code sharing, providing free or discounted utilities and connecting infrastructure," said the report.
It called for immediately setting up Essential Air Services Fund (EASF) by the ministry as this will have a multiplier effect in terms of higher growth of local economic activities, tourism and employment.
"India is blessed with a great geographic location, a large upwardly mobile middle class and immense tourism opportunities. We have just touched the tip of the aviation iceberg," says Amber Dubey, partner and India head of Aerospace and Defense at global consultancy KPMG.
