Union Budget 2012: Aviation sector seeks changes in FDI policy

NEW DELHI: The Indian aviation sector which has been hard pressed for cash is looking forward to the Union Budget 2012 for a direction on changes in foreign direct investment (FDI) policy. The government has also favoured changing the policy to allow investments by foreign airlines in Indian carriers, but it is yet to be notified.
The cash-starved sector is also looking at the Finance Minister, Pranab Mukherjee to provide some tax sops that will enable the reduction of high debt and cost burden.
The government has already taken a major policy initiative to allow the debt-ridden industry to directly import jet fuel. However, the airlines industry in its pre-budget expectations has expressed hope on being assigned the ‘infrastructure status’. The beleaguered airlines have sought this status to lower the incidence of taxation.
The aviation sector hopes that the government will look at further easing investment norms for the sector in the budget, particularly those relating to allowing foreign carriers pick up stake in Indian airlines.
With Kingfisher Airlines and Air India being the worst- hit, industry sources said the Indian carriers, which were starved for cash and burdened with a combined debt of around Rs 50,000 crore, desperately needed to raise equity to remain afloat.
The budget is expected to bring some good news for ailing Air India with the government likely to consider a support package of about Rs 10,000 crore, including additional equity infusion of Rs 6,600 crore.
FICCI expects that Aviation Turbine Fuel (ATF) may be granted ‘Declared Goods’ status. This the chamber said in its pre-budget memorandum, will facilitate emergence of Indian Airports as ‘Hubs’ and help in stabilizing ATF prices across the country which will lower tariffs for passengers.
FICCI also recommends that Section 72A of the Income Tax Act be amended to extend the benefits therein to the entire airline industry and not only to public sector companies with a view to providing the private airlines operators a level playing fields as well as sustaining the current growth of the civil aviation sector.