The civil aviation sector is on the verge of collapse and needs an urgent boost to prevent more Kingfisher-type meltdowns and job losses.
The review meeting saw civil aviation minister Ashok Gajapathi Raju pointing out that poor returns from airports, burgeoning costs and a tax structure that hurt Indian maintainance, repair and overhaul industry was burying the sector under debt.
Raju is understood to have compared the situation with what the telecom sector faced in 1999 before the then Vajpayee government worked out a rescue package that allowed mobile service providers to move from fixed fees to revenue sharing.
The ministry in its presentation stressed on the potential of the MRO industry generating large revenues and enhancing employment if service tax and VAT structures were made more attractive. The current rates make India a 35% more expensive destination for MRO operations than a place like Singapore.
Various aircraft are seen on static display at the India Aviation 2014 airshow at Begumpet airport in Hyderabad on March 13, 2014.
Tweaking tax rates can give employment to skilled hands and bring business to India while there was little revenue in the current circumstances.
Unsurprisingly, Air India contributes a staggering Rs 30,000 crore to the accumulated Rs 49,000 crore losses in the civil aviation sector and the ministry outlined the need for a credible, result-oriented capital infusion plan.
Raju stressed the government did not want any aviation company to go under. There should not be any more Kingfishers and job losses, he said indicating the fragile financials of several private operators.
File photo: Striking employees of Kingfisher Airlines holding placard during protest march at domestic airport in Mumbai.
The meeting also saw industry grouses like high taxes on aviation fuel that are seen to make domestic air travel much more expensive and vulnerable to price shocks.
The review took stock of airports not delivering the returns that have been anticipated as they failed to develop into the hubs that had been envisaged. The need to ensure higher regional connectivity and bring about more options for ordinary passengers and business persons who travel to smaller centres was also discussed.
Rationalizing operational costs and addressing demand and supply imbalances are matters needing urgent attention, the PM was told as it was pointed out that there are no seats available on certain sectors or destinations while fares have soared, retarding the growth of the sector.
There is a serious problem of job losses and fresh graduates in technical and flying disciplines not finding employment that requires strong policy corrections, Modi was informed.
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