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Ignored by FM, aviation pins hopes on tourism

P R Sanjai  |  Mumbai 

Disappointed at being left out in the Union Budget, the domestic aviation industry is pinning hopes on deriving benefits from growth in tourism in the country.
Vasudevan Thulasidas, chairman, Federation of Indian Airlines (FIA), said the thrust on investment in the tourism and tourism infrastructure sectors would fetch good dividends to the aviation industry.
"The Budget has allocated Rs 520 crore for development of tourism infrastructure. This, coupled with the tax holiday for two-, three-, and four-star hotels, will drive growth in the tourism industry. Aviation and airlines will benefit from growth in tourism," the chairman and managing director of Air-India said.
The captains of the industry is grumbling that the aviation industry has failed to catch the attention of the Finance Minister and the Budget. Echoing the general mood, G R Gopinath, managing director, Air Deccan, said,"The initiatives in the tourism sector are a welcome step. But the government could have subsidised the jet fuel for aircraft such as Airbus 320 and Boeing 737 which are connecting more regional locations, thus more passengers."
Madhavan Menon, managing director, Thomas Cook (India), said, "There is no mention of airports or ports development which is disappointing as these would be key to tourism promotion."
P Chidambaram in his Budget has extended declared good status for the aviation turbine fuel (ATF) sold to new-generation small aircraft with maximum take-off mass of less than 40,000 kg operated by scheduled airlines.
Currently, this status under Section 14 of the CST Act is only to turbo-prop aircraft being used by Air Deccan, Jet and Kingfisher. "This is a small matter which has large beneficial consequences," the FM said while presenting the Budget yesterday.
Airlines flying Brazilian-made Embraer and Canadian-built Bombardier CRJ (both with less than 100 seats) would benefit by this move. Regional aircraft market, which is dominated by French plane-maker ATR, will witness fresh pitch from Embraer and Bombardier. Average weight of these aircraft is below 35,000 kg.
M Thiagarajan, managing director of the Chennai-based Paramount Airways, which is currently flying five Embraers said, "The sales tax for ATF will now come down to 3 per cent from the current average of 34 per cent. This will boost regional connectivity."
Alok Sharma, president, Air Sahara, said, "We welcome this . Air Sahara operates seven regional jets and we will save in terms of lowered fuel cost to the tune of Rs 25-30 crore annually."
The latest measure has brought acquisition of business and corporate jets under duty net. India has 123 business jets and is planning to add 300 more in next three years for personal use.
"The non availability of this exemption we believe, will significantly increase the fleet acquisition costs of Indian carriers, particularly in a market where demand for aircraft is greater than the supply," Thulasidas said.
The FM had also levied 3 per cent import duty on of aircraft, including helicopters, besides CVD and additional customs duty. Import of aircraft by the government and scheduled airlines is exempted from all duties which will continue.
Centre for Asia-Pacific Aviation, an industry consultant firm, India chief Kapil Kaul said, "The industry is disappointed at ignoring its recommendation on continuation of exemption on withholding tax on leased aircraft under Section 10(15A)."

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First Published: Fri, March 02 2007. 00:00 IST