Civil Aviation & Airport Infrastructure



India is world’s fastest growing aviation market registering double digit growth for the last 24 months. It replaced Japan and became 3rd largest domestic aviation market in 2016. The recent industry growth can be attributed to capacity expansion of low-cost carriers (LCCs), world class airports, Increased Foreign Direct Investment (FDI) in domestic airlines, advanced and growing emphasis on regional connectivity.

With the implementation of GST framework, airlines in the country have been hit hardly. 
Under GST structure, while airlines can claim input tax credit on all inputs (excluding ATF) on the business class; for the economy class they can claim input tax credit only on input services. Considering the fact that majority of revenues come from the economy class to the airlines, partial input tax credit on inputs for economy class would result in an additional cost to the airlines. For airports, sales of goods from Duty free shop would not attract any state taxes, since it was outside the state’s jurisdiction to levy duty free shops, under Pre-GST period. However, there is no clarity if the existing exemptions would continue or not under GST structure.
 
On the policy front, NCAP has introduced slew of measures to promote sustainable and affordable growth in the country. The policy target to enable 500 Mn domestic ticketing by 2027 and 200 Mn international booking through implementation of UDAN scheme (i.e. RCS), which will target indicative airfare of INR 2500 per passenger approximately, for a distance of 500kms to 600 kms on RCS routes (equivalent to about one hour of flight). It also provided much respite to the regulatory regime of airport tariff framework. It outlined that future tariffs at all airports will be calculated on a ‘hybrid till’ basis, unless otherwise specified. Further, it also targets to liberalize the restrictions of land use by future Greenfield airport operators.
 
Development of cargo sector is also much dependant on the state of the airlines, airports etc. NCAP has provided strong push. It has provided that in all future development of airports/concessions, minimum there will be standard level of cargo facility at the airport. It also provided that cargo facilities co-located at an airport will get the benefit of ‘infrastructure’ sector. Air Cargo Logistics Promotion Board (ACLPB) was constituted to promote growth in air cargo by way of cost reduction, efficiency improvement and better inter-ministerial coordination.
  
The sector, however, faces various headwinds in terms of shortage of airport infrastructure resulting in congestion, competition from foreign airlines, implementation challenges of RCS especially state support is far from actual materialization in providing decisive measures to promote UDAN.

 

CHAIRMAN

CO-CHAIRMAN

Mr. Narayana Rao
Director
GMR Group
Mr. Ankur Bhatia
Executive Director
Bird Group


NODAL OFFICER

Mr. Ajay Sharma 
ASSOCHAM 
5, Sardar Patel Marg, Chanakyapuri
New Delhi - 110021
Phone: 011 46550555
ajay.sharma@assocham.com