Aviation ministry prepares package for north-east

Sanjay Jog

Mumbai, Oct 17: The civil aviation ministry, in a serious bid to improve better airlinks within the north east and with the rest of the country, has formulated a comprehensive package with a proposal to reduce sales tax to 4 per cent for Turbo-prop aircraft, exemption of intra-north east sectors from inland air travel tax (IATT) and introduction of 50-seat capacity aircraft in north east states by the Indian Airlines (I-A).

I-A, which has been incurring an average annual loss of Rs 60 crore annually on account of its north east operations, has been evaluating the 50-seater aircraft leasing proposal. It has already firmed up a plan for acquiring six ATR 42-500 aircraft, of which four 50 seater aircrafts would be deployed exclusively in north east states.

Central government sources told The Financial Express that the north east package would come up for discussion at the north eastern council meeting scheduled for October 19 at Guwahati. The meeting would take place in the presence of civil aviation minister Shahnawaz Hussain.

I-A currently pays sales tax on fuel for jet operations as follows : Assam -22 per cent, Manipur -20 per cent, Nagaland -15 per cent and Tripura -25 per cent. However, in view of its demand for a paltry 4 per cent sales tax, it expects to pay Rs 0.4 crore annually. As far as inland air travel tax is concerned, I-A estimates that its collection on account of its 50-seater north eastern operations would be Rs 3 crore. It has demanded that I-A may be permitted to retain the inland air travel tax.

According to I-A, exemption from customs duty on aircraft import would result in the reduction in cost of operations by Rs 1 crore annually (spread over 5 years).

Sources said that as per present norms, customs duty of 3 per cent of aircraft value was payable even on lease of aircraft. I-A has estimated the payment of Rs 5 crore of customs duty on account of four aircrafts to be deployed in the north east.

Sources said that I-A, which has assumed an annual loss of Rs 50 crore in the north eastern region, has made it clear that it was not in a position to absorb the losses and sought a total seed capital of Rs 70-80 crore as initial fund outlay to get the 50-seater project off the ground.

The fund would be needed for erase deposits, customs duty, training, maintenance and handling infrastructure and spares float.
I-A has demanded that it would need government support to increase fares in north eastern region to match levels in other parts of India.

Such a fare hike was necessary as the north east fares on proposed 50-seater operations were about 20 per cent lower than fares elsewhere. According to I-A, the estimated additional revenue impact would be to the tune of Rs 5 crore annually.