Thursday, 15 March 2012

India’s vision of becoming a global aviation hub and the third largest aviation market by 2020 can be achieved through an 8-point action agenda

Syed Akbar
Hyderabad, March 15: India’s vision of becoming a global aviation hub
and the third largest aviation market by 2020 can be achieved through
an 8-point action agenda that pursues policies conducive to the growth
of the civil aviation sector and keeps the focus squarely on quality,
cost and passenger interest, according to a FICCI-KPMG report.

The report, “India: The Emerging Aviation Hub,” was released on the
second day of the India Aviation 2012 here on Thursday. It calls for a
“close collaboration” between the Ministry of Civil Aviation, other
related ministries including finance, home, defence, external affairs,
commerce and industry and tourism, regulators (DGCA and AERA) and the

It suggested that State government should reduce sales tax on aviation
turbine fuel. The long-term benefits in terms of higher economic
activity and employment generation would more than compensate for the
notional loss of tax revenue in the short run.

There should be an Essential Air Services Fund (EASF) to support air
connectivity to Tier 2/3. It called for development of investor
friendly regulatory policies to encourage greater private sector
investments in airports.

The report urged the government to implement recent policy decisions
like 49 per cent FDI limit, direct import of ATF and opening of
bilateral rights to support the airline sector. Establish safeguards
to prevent excessive and predatory ticket pricing since both are

Other suggestions include establishment of Air Cargo Promotion Board
to address the significant challenges in the air cargo sector and make
India an air cargo hub for the region, promotion of domestic MRO
industry by removing the anomalous tax structure, and setting up of a
world-class National Aviation University.

The research paper notes that while both passenger and cargo traffic
have shown robust growth and there has been modernization and
augmentation of capacities at various metro and non-metro airports,
India now stands at a crossroad wherein certain fundamental changes
can help propel it from a leading aviation market to becoming a global
aviation hub.

Most of the Indian air carriers are posting cash losses due to
volatile oil price, high fuel taxes, rupee devaluation, high interest
rates and below-cost fares. Though world-class airports have been
developed by AAI and the private sector, there are significant
challenges related to fixation of airport tariffs, land acquisition
and various government approvals.

India would need to broaden the base of domestic flyers through
greater air connectivity in tier 2/3 cities.

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