IATA Seeks 'Ease of Doing Business' in India

The International Air Transport Association (IATA) has called for the development of a comprehensive policy for aviation aligned with the stated intention of the Indian Government to make it easier to do business in India. The objective is to allow India to derive maximum social and economic benefits as its aviation market grows to become the third largest in the world. That is expected to happen in 2029 when the number of travellers to, from and within India will near 280 million annually.

Delivering the keynote address at the Aviation Day India, organised by IATA together with the Indian Ministry of Civil Aviation (MoCA) and the Confederation of Indian Industry (CII), the Director General and CEO of IATA, Tony Tyler stated: “Already aviation and aviation-related tourism support seven million jobs in India and contributes $23 billion to India’s GDP. The healthy growth of the sector has the potential to expand these benefits tremendously. But there are immense challenges which must be overcome as seen in the sector’s financial performance. While demand growth is robust and some airlines are generating profit, sector-wide losses for India are still expected to exceed $1 billion this year. Onerous regulation and processes, debilitating taxes and expensive infrastructure are holding back the industry’s ability to deliver greater economic benefits to India.” The three priority areas highlighted by Tyler where work is needed to reduce costs in India are dealt with in the succeeding paragraphs.

Reducing the Tax Burden

The application of service tax should not apply to services rendered outside of India including those for over flight charges, global distribution systems, extra baggage fees and international tickets. He also highlighted that the incoming goods and services tax (GST) regime should also zero-rate international air transport services in line with the guidelines issued by the Organisation for Economic Cooperation and Development (OECD), the need to follow international treaties that protect airlines from double-taxation on income and the need to avoid double-taxation within India in situations where airlines are effectively taxed on taxes collected.

Competitive Fuel Pricing

State taxes on jet fuel can be as high as 30 per cent. Tyler urged the government to grant ‘declared goods’ status for jet fuel which would limit taxation. ‘The decision to introduce competition in jet fuel supply at key airports needs to be followed up with open access to the pipelines that get fuel to the airport in order for efficiencies of a liberalised market to be realised’.

Non-interference in AERA

Tyler highlighted the importance of allowing the Airports Economic Regulatory Authority (AERA) to do its work independently. He called for action in three areas as under:

• Overcome legal challenges which prevent AERA’s recommendation for a 78 per cent reduction in Delhi’s airport charges from being implemented.
• Protect the independence of AERA and the principle of a ‘single till’ for airport charges in light of stock exchange filings which show that the Ministry of Civil Aviation had instructed AERA to use a hybrid till for its ‘independent’ determination of airport charges at Hyderabad.
• Carefully assess the proposed privatisation of airports at Jaipur, Kolkata, Ahmedabad and Chennai to ensure that the ‘single till’ principle is maintained and that the privatisation terms are appropriate to the level of development at the airports. Significant public investment in these airports should be considered in a cost-benefit analysis aimed at determining if the public interest would be best-served by a concession contract or a management contract.

Smarter Regulation

“Regulation is also holding back the development of the sector. Well-intentioned regulations, but which are inconsistent with global standards, make doing business in India very difficult for the airlines. India imposes rules and requirements that are not seen anywhere else in the world,” said Tyler. He highlighted several examples where Indian regulations are out-of-step with global standards and best practices.

“India needs smarter regulation. This essentially means taking a business-like approach to regulation using common sense and proven principles. These include targeting regulation to address real issues, using global standards where they exist, satisfying a rigorous cost-benefit analysis and consultation with the industry. If we can work together to build regulations that meet the public interest, are consistent with global standards and which can be implemented efficiently, then we are all winners. And we will avoid the angst involved in unwinding mistakes,” said Tyler.

“There is a great opportunity for the government’s ease of business agenda in aviation. Aviation is already a largely standardised industry with many global references to guide us. And by working with MoCA based on airline input, we could develop and deliver an effective action plan for aviation in India. I would like to be ambitious about what we can achieve. Aviation should be the model sector demonstrating India’s efforts to make it easier to do business here,” said Tyler.