The International Air Transport Association (IATA) has called for the development of a comprehensive policy for aviation aligned with the Indian Government’s stated intention to make it easier to do business in India. The objective is to allow India to derive maximum social and economic benefits as its aviation market grows to become the third largest in the world. That is expected to happen in 2029 when the number of travelers to, from and within India will near 280 million annually.

“Already aviation and aviation-related tourism support seven million Indian jobs and US$23 billion of India’s GDP. The healthy growth of the sector has the potential to expand these benefits tremendously. But there are immense challenges which must be overcome—as seen in the sector’s financial performance. While demand growth is robust and some airlines are generating profit, sector-wide losses for India are still expected to exceed $1 billion this year. Onerous regulation and processes, debilitating taxes and expensive infrastructure are holding back the industry’s ability to deliver greater economic benefits to India,” said Tony Tyler, IATA’s director general and CEO.

He also noted that regulation is also holding back the development of the sector. “Well-intentioned regulations, but which are inconsistent with global standards, make doing business in India very difficult for the airlines. India imposes rules and requirements that are not seen anywhere else,” said Tyler.

Tyler was delivering a keynote address at the Aviation Day India organised by IATA together with India’s Ministry of Civil Aviation (MoCA) and the Confederation of Indian Industry. In his addressTyler highlighted three priority areas where work is needed to reduce costs in India:

Reducing the Tax Burden: The application of Service Tax should be aligned with a principle that it does not apply to services rendered outside of India including those for overflight charges, global distribution systems, extra baggage fees and international tickets. He also highlighted that the incoming GST regime should also zero-rate international air transport services in line with OECD guidelines, the need to follow international treaties that protect airlines from double-taxation on income and the need to avoid double-taxation within India in situations where airlines are effectively taxed on taxes collected.

Competitive Fuel Pricing: State taxes on jet fuel can be as high as 30 per cent and Tyler urged the government to grant “declared goods” status for jet fuel which would limit taxation. “The decision to introduce competition in jet fuel supply at key airports needs to be followed up with open access to the pipelines that get fuel to the airport in order for efficiencies of a liberalised market to be realised,” added Tyler.

Allowing AERA to do its work: Tyler highlighted the importance of allowing the Airports Economic Regulatory Authority (AERA) to do its work independently. He called for action in three areas:

• Overcome legal challenges which prevent AERA’s recommendation for a 78 per cent reduction in Delhi’s airport charges from being implemented.
• Protect the independence of AERA and the principle of a ‘single till’ for airport charges in light of stock exchange filings which show that the Ministry of Civil Aviation had instructed AERA to use a hybrid till for its ‘independent’ determination of airport charges at Hyderabad.
• Carefully assess the proposed privatisations of Jaipur, Kolkata, Ahmedabad and Chennai to ensure that the ‘single till’ principle is maintained and that the privatisation terms are appropriate to the level of development at the airports.