Minister of civil aviation Praful Patel has asked states to rationalise taxes on aviation turbine fuel (ATF) and review land acquisition practices for improvement of airport infrastructure to encourage expansion of the aviation sector in the country.
Criticising high taxes at the state-level, the minister said aviation sector would be the largest employment generator and investment attractor in a few years and states had much to reap from this. ?There is cut-throat competition in this sector and airlines are losing money mainly because of competition and high taxes,? Patel said at a conference involving state governments in New Delhi.
At present, states are charging sales tax at rates ranging from 4 to 35%, but this tax only contributes between 0.5 and 2% of their revenues. On the other hand, ATF contributes to nearly 40% of the airlines? operating cost. In India, ATF prices are already 60% higher than most other countries. The country?s ATF consumption has jumped from 2484 MMT in 2003-04 (when prices were around $25 a barrel) to 4,008 MMT in 2007-08 ($100 a barrel).
Rationalisation of taxes, particularly the state sales tax, would encourage more airlines to fly into a state, leading to creation of aviation as well as tourism infrastructure that would in turn create jobs and income through a multiplier effect, Patel pointed out. He gave the example Guwahati which has seen unprecedented growth in the number of passengers and aircraft flying to it.
Interestingly, aircraft flying abroad don?t pay sales tax and non-scheduled carriers pay around 5% more sales tax than the scheduled carriers.
At present the states of Rajasthan (28%), Bihar (29%), Gujarat (30%), Andhra Pradesh (33%), Kerala (28.75%) Tamil Nadu (29%) Maharashtra (25%), West Bengal (25%) and Himachal (25%) charge some of the highest rate of sales tax on ATF.
Further, Patel said Indian airports would have to compete with aviation hubs like those in Singapore, Dubai and Doha. For this, states have to develop airports and use the large number of existing airstrips through the PPP route ?? because no major airport can be a standalone. They will have to become hubs and India needs at least 10-12 such hubs, like the one coming up at Nagpur?.
?All airports may not be of the size of Delhi and Mumbai. They can be developed with the basic minimum facilities… India needs about 500 airports in the next 10 years,? he added.
On the issue of land acquisition, Patel said it was now the prime responsibility of state governments to provide land for new ones as well as expanding the existing ones. Giving examples of Goa and Gujarat where problems have occurred in airport expansion projects due to non-availability of land, Patel said: ?We have been experiencing similar problems in many other states as well. Unless you cooperate? we will not be able to build the required infrastructure.?
The minister also asked the states to promote intra-state connectivity via air travel and look into bringing helicopter services to the people.