Draft Aviation Policy: 8 Key Changes Proposed

By siliconindia | Monday, 02 November 2015, 04:17 Hrs

BANGALORE: The government finally rolled out the much anticipated draft civil aviation policy which introduced airline tax incentives, upholding and restoration works of aircrafts. In order to fund regional connectivity scheme centre also has mooted 2 pct levy on all air fares, reports DNA.

The civil aviation draft has been under consideration since a year before it has finally been unveiled now.

Following are the Prime Takeaways of the Draft Policy:

1) FDI in aviation: The Centre has pitched to increase FDI in aviation above 50 pct in comparison to present 49 pct provided the open skies policy is executed for countries located within a radius of 5,000 km.

2) 2pct Levy: The Civil Aviation Ministry has also pitched 2 pct levy on airfares for all domestic and international flights to the scheme of regional connectivity, said Civil Aviation Secretary R N Choubey. "The government expects about Rs 1,500 Cr annually from charging 2 percent levy "he added.

3) No-frills airports: In an initiative to boost regional connectivity, the policy has proposed to build up no-frills airports and supply viability gap funding for the airlines. No-frill airports have a budget of 50 Cr.

4) Enhance Regional Connectivity:

a) The draft policy proposes that the implementation of the scheme from April 1 will introduce all-inclusive air fare of not more than 2,500 for one-hour flight.

b) Regional connectivity is expected a boost with the proposal of concessions like free land offered by govt. and lessening the VAT on ATF to 1 percent or even lesser as per the policy.

c) No service tax will be applicable on tickets as per the scheme excepting service tax exclusion for scheduled commuter airlines availing jet fuel from airports under this scheme.

d) The Centre will bear 80 pct of the viability gap funding for regional connectivity while the rest will be managed by the states.

5) Service tax and levy on VAT will be exempted to make MRO (Maintenance Repair, Overhaul) economical.

"MRO, ground handling, cargo and ATF infrastructure co-located at an airport will also get the benefit of infrastructure sector, with benefits under Section 80-IA of Income Tax Act," Choubey said.

6) Scheduled Commuter Airlines: In order to have efficient regional connectivity, the revised policy has pitched the promotion of Scheduled Commuter Airlines (SCA). A paid up capital of 2 Cr will be required to offer new players an easy entry.

7) Route dispersal guidelines: Considering the transparent criteria the Category I routes will have more routes thereby mooting rationalization under route dispersal guidelines.

"A review will be carried out after five years to consider the requirement of further liberalization in code share agreements and to drop the requirement of reciprocity," Choubey said.

8) 5/20 Rule: Comments from stakeholders will be taken into consideration for either the continuation or abolition of this 5/20 Rule. As per the rule, only airlines that have completed 5 years of operation in domestic market can start international airlines and should have a minimum of 20 aircraft in its fleet. The suggestions will be welcomed on three options:
a) Abolition of the rule

b) Continuation of the same norms

c) Connecting overseas flying rights with domestic flying credits.