Budget 2019 expectations: How Modi government could bring aviation industry back on track

The Indian aviation sector is going through one of its toughest phases in the longest time led by the grounding of Jet Airways' operations. The grounding of Boeing 737 MAX-8 planes by domestic airlines and repair works at Mumbai airport have made things worse for the otherwise fastest-growing aviation market in the world. The impact is also being faced by the passengers as ticket fares have shot up. The ripple effects could also be witnessed in the hospitality and tourism sector. The high operating costs (taxes, fuel charges, and landing and parking rates) have been another challenge for the airlines.

To deal with these issues would be one of the most important things on Finance Minister Nirmala Sitharaman's agenda when she presents the Union Budget in the Parliament on July 5. Peeyush Naidu, Partner, Deloitte India believes the government should look to bring down the taxation on aviation fuel which would help reduce the operating costs.

"To bring down the high taxation on aviation fuel - among the highest in the world, the Government could consider bringing aviation turbine fuel (ATF) and other related fuels (used for commercial scheduled/non-scheduled operations and training purposes) under GST," he told Zee Business Online.

He added that higher taxes force the airlines to outsource a big part of the MRO business to international providers and this could change if GST rates are reduced.

"High taxes have led airlines to outsource 80-85% of the country’s $1.4 billion MRO business to international providers. The government must focus on reducing the tax burden impacting the growth of MRO industry by reducing GST rates, and removing instances of tax on certain items which attract an import duty as well as a GST over and above that," he said.

The government's decision to introduce UDAN (Ude Desh ka Aam Naagrik) with the objective of letting the common citizen of the country fly at affordable rates was welcomed by most. However, more could be done to promote the use of smaller aircraft under the scheme. 

"To provide a fillip to its marquee Regional Connectivity Scheme to improve air connectivity to remote areas, the Government should provide incentives/budgetary support in terms of promoting use of smaller aircraft under the scheme, providing additional funds for VGF support under the scheme, and developing airport and seaport infrastructure in Tier-II and Tier-III cities of the country," Naidu said.