Govt proposes tax incentives to airlines, regional connectivity…

The government today proposed tax incentives for airlines, maintenance and repair works of aircrafts besides mooting 2 per cent levy on all air tickets to fund regional connectivity scheme unveiling the much-awaited draft civil aviation policy.In a significant move, the Civil Aviation Ministry has pitched for over 50 per cent Foreign Direct Investment (FDI) against 49 per cent limit in domestic carriers in case the open skies policy is implemented. Under the open skies policy, overseas airlines can operate endless number of flights into and out of India. Presenting the revised draft national aviation policy, Civil Aviation Secretary R N Choubey said that the ministry has proposed 2 per cent levy for regional connectivity scheme on all domestic and international tickets. He also added that the government expects about Rs 1,500 crore annually from charging this 2 per cent levy. The policy has mooted numerous measures to boost regional connectivity including setting up of no-frills airports and providing viability gap funding for airlines. Another proposal under regional connectivity scheme is to cap fare at Rs 2,500 for one-hour flight. The government has also proposed to exempt such activities from service tax net and not levy any VAT to make MRO (Maintenance Repair, Overhaul) cheaper. However, the government has decided to seek more opinions from stakeholders before taking a final call on 5/20 norms — whereby local airlines can fly overseas only when they have five years operational experience and at least a fleet of 20 aircraft. The policy has currently mooted three options being to abolish the norm completely, continue with it or link overseas flying rights with domestic flying credits. The draft policy would be put up for three weeks for the comments from stakeholders.

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