New Delhi, July
11:
The Government
is working on a comprehensive package for the airline industry. This will also
include relaxation of norms for Foreign Direct Investment (FDI) in domestic
airlines.
A senior
Government official told Business Line, “The Cabinet is likely to consider
a comprehensive package immediately after the Presidential election. This
package is being prepared in consultation with the Ministries of Civil
Aviation, Petroleum and Finance, Department of Industrial Policy and Promotion
(DIPP) among others” The Presidential election will be over with the counting
of votes, scheduled for July 21.
Equity stake
The highlight
of the package will be allowing foreign airlines to pick up equity in domestic
scheduled airlines. At present, though FDI up to 49 per cent is allowed,
foreign airlines cannot pick up equity either directly or indirectly. The
expected change in policy may remove this restriction.
A senior DIPP
official claimed that the consultation on FDI in the domestic aviation sector
is almost complete. The official, however, refused to comment on whether
political opposition had been sorted out or not. DIPP is the nodal wing for the
FDI issue. Earlier, there were differences in the Government on whether to
allow 26 per cent or 49 per cent. Then regulatory issues followed. And finally,
when these issues were resolved, alleged opposition from the UPA ally Trinamool
Congress (TMC) delayed a decision on the proposal.
The second
important issue the package is likely to deal with is jet fuel. A senior
Government official said the option of moving aviation turbine fuel to a
specific rate of taxation from ad valorem is being considered. This is
because declaring aviation turbine fuel a ‘Declared Goods’ might not find
favour with States.
A product
brought under ‘Declared Goods’ category attracts lower and uniform duty of 4
per cent in all States. At present, the sales tax on ATF in various states
ranges from 4-30 per cent. At the same time, levying duty at a specific rate
will not raise the total tax component in case the crude prices rise.
Currently, whenever the price rises, airlines face a double whammy as both the
tax component at the Central and State level rise.
Apart from
these two issues, there may be some provisions for making Delhi and Chennai
hubs. The Prime Minister, while setting the targets for infrastructure sector
for 2012-13, has already talked about such a move.
Airline
policy
The
Government is working on a comprehensive package for the airline industry. This
will also include relaxation of norms for foreign direct investment in domestic
airlines.
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