The civil aviation sector in the country is passing through turbulent times, much of it due to the global economic slowdown. But the main reason for the dramatic dip in the sectoral growth is due to the high taxes on the Aviation Turbine Fuel (ATF), the new Civil Aviation Secretary K.N. Srivastava told this newspaper. The sector has the potential and should be revived to boost the economy, he felt.
Mr Srivastava, a 1978 batch IAS officer of Karnataka cadre, who took over his new assignment from his predecessor Mr Syed Nasim Ahmed Zaidi, was earlier special secretary and financial adviser in the ministry of external affairs. “The growth in the civil aviation sector, which had witnessed a spurt of 30 to 35 per cent in 2006-09 has now slipped to 10 to 12 per cent. In some sectors, it has even come to negative,” said Mr Srivastava, who has served in the civil aviation ministry as joint secretary from 2006 to 2009.
Attributing the turbulence in the civil aviation to global economic slowdown and high taxation on ATF, Mr Srivastava said it is high time that the Centre and state governments “rationalized” the tax structure on ATF to ease pressure on airlines, which would, in turn, bring down rising air fares. “Around 50 to 60 per cent of the operating cost of airlines is on account of ATF. Unlike the rest of the world, the tax component on ATF is phenomenally high in the country - at around 40 per cent. Sales tax is around 30 per cent and Central Excise is between 10 and 12 per cent. This has to be rationalized to revive the sector,” he said. The middle class, which had contributed sizeably to the growth of the civil aviation industry in the recent past after low-cost carriers came up with attractive air fares, has now been wary of air travel because of the escalating fares.
“If the tax on ATF is rationalized, revenue generation will not be adversely affected because air fares will naturally come down and the volumes will increase. The high taxes on ATF were levied because of a wrong perception - that only the elite travel by air,” added the top bureaucrat. “Reduction of flight operations by Kingfisher airlines – from around 600 per week to around 90 now - has also pushed the air fares up. The fares will come down. We need healthy competition for a robust sector,” he said.
Mr Srivastava said developing smaller airports in Tier II and III cities should be promoted to boost civil aviation. “Karnataka had drawn up a blueprint to have smaller airports at district headquarters. They should take it forward,” he said adding that the concept of air taxis should also be encouraged to boost the sector. Regarding Air India, he said the Government has approved a Rs 33,000-crore revival package for the airline with performance-based milestones. “We are sure that Air India will revive shortly,” he added.