Expert Speak - Policy on tax should be Unambiguous

SP’s Aviation (SP’s): How do you perceive the growth of business aviation in India in the short and long term perspective?

Colonel Jayanth Poovaiah (JP): Demand for business aviation generally is a function of corporate profits and the economy. Indian economy (apart from the last 12 months) has enjoyed a relatively good period of growth. In fact, even in the current turmoil, India has not been impacted as significantly as the rest of the world. Indian entrepreneurs have created a tremendous amount of wealth over the last few years. Another important driver is the growth of second tier cities in India as centres of industrial and economic growth. Demand for helicopter and light aircraft charter is bound to grow as all major businesses have their corporate offices in metros like Mumbai, Delhi and Kolkata, but their factories and facilities are located in the smaller towns a few hundred kilometers away. Also, business aviation penetration in India is not yet commensurate with its GDP as compared to the rest of the world. In other words, we have a long way to go to realise the full potential of business aviation. India’s geographic spread, current infrastructure and pace of economic growth provides a potent mix that is very conducive for business aviation growth.

SP’s: What are the key problems plaguing day-to-day operations?

JP: At present, according to Civil Aviation Regulation (CAR) stipulations, a pilot is required to have a minimum of 100 hours Pilot in Command (PIC) to be eligible for Single Pilot Operations (SPO). This requirement is too high and restricts optimal utilisation of experienced pilots.

Further, at many airports there is no transport available transfer crew to/from the aircraft to air traffic control and other locations. Even at airports where such facilities are available through the Airports Authority of India, the charges are very high. It is suggested that crew transport at reasonable rates are provided at all airports. This is especially pertinent for nonscheduled operators as they can’t get into specific contracts with ground handling agents whose operations are limited.

Efforts should also be made to explore the feasibility of providing separate corridors for helicopter operations.

SP’s: Describe the current business aviation environment in India. What should be the outlook in the short and long term?

JP: Currently, the business aviation industry is in a state of unstructured growth largely responding to the needs of corporate India, be it for utility applications or management travel. It remains dominated by a large number of small players who own one to two aircraft and are unable to optimise their fleets to offer nationwide services at reasonable costs that will also allow them to remain independently profitable. Another key criterion is to educate the market of the advantages of using business aviation. Businesses need to be shown the rationale of the cost of executive time and the efficiency achieved.

While more serious players are entering the sector and the government has made some progress by updating antiquated policies and infrastructure in the country to promote civil aviation, it still lags behind in meeting the needs of the growing market. Today, the facilities at most airports are unable to keep up with the demand of both scheduled and unscheduled operators. Special and dedicated infrastructure will be needed to allow business aviation to grow to it full potential. Policy makers and regulators will have to either provide for or give an impetus to private enterprise to create infrastructure, like airports and helipads.

SP’s: What are the main shortcomings in India’s business aviation infrastructure?

JP: There is a paucity of airfields for a country the size of India. This is further compounded for business aviation because scheduled airlines are given much more importance. For instance, certain major airports, like BIAL Bangalore, do not allow business aviation to operate from within their premises. Since airports do not have dedicated terminals for business aviation, passengers have to go through the same tedious processes like any other air traveller. Helicopters are even lower down on the priority list.

SP’s: What are key taxes/duties/levies/charges that add to the expense of owning and operating a business aircraft?

JP: Key taxes/duties/levies/charges that add to the expense of owning and operating a business aircraft are:
Taxes on lease of aircraft from abroad adds to cost significantly. Government should reintroduce the exemption under IT. There are not enough aircraft in India and importing will not adversely affect the Indian market.
Service tax element on the interest paid on lease finance should also be removed, since the external borrowings are also expensive and increases the cost of operation. There need not be a tax on servicing of borrowings from abroad since this would not reduce the demand for domestic funds given that we anyway depend on funds from abroad. Policy on any tax should be clear and unambiguous, as was the case of the applicability of service tax.