Minister of State in the Ministry of Civil Aviation, Shri K. C. Venugopal informed the Rajya Sabha today that a Working Group was constituted under the Chairmanship of Secretary, Civil Aviation to discuss the factors causing stress in civil aviation and to suggest solutions to the same.
Based on the recommendations of the Working Group, the Government has taken several measures to revive the aviation industry, reduce the economic losses and ensure long term viability of the sector. These measures include (i) Director General of Foreign Trade has allowed direct import of Aviation Turbine Fuel (ATF) by airlines on actual user basis; (ii) FDI by foreign airlines in the domestic scheduled and non-scheduled carrier has been permitted upto 49 per cent of their paid up capital; (iii) ECB upto $ USD 1 billion has been permitted for the airlines to meet their working capital requirement and (iv) The State Governments have been persuaded to reduce the VAT on ATF. As a result, Maharashtra, Rajasthan, Chhatisgarh, Jharkhand and West Bengal have reduced the VAT on ATF with certain conditions.
Most airline operators in India have been recording losses for the last three years due to the spiralling cost of ATF, global economic slowdown, low yield due to intense competition and consequent widening gap between revenue and expenses and depreciation of rupee have contributed to financial crisis of the airline sector. Over the years, the operational costs for the airlines have gone up mainly due to increase in fuel prices and depreciation of Rupee. Further, the airport/user development fees have gone up for some major airports. The service tax has also increased in FY.