Aviation

OUTLINE

  • India holds the ninth largest share in the civil aviation market, and is projected to be the third largest shareholder in the aviation market by 2020.
  • Total passenger traffic stood at 224 million in 2016
  • India is expected to have 60 million international passengers by 2017
  • Indian carriers are expected to possess 800 aircrafts by 2020
  • India is one of the least penetrated air markets in the world with 0.04 trips per capita per annum as compared to 0.3 in China and more than 2 in the USA
  • Passenger traffic has grown at a rate of 20% per annum in the last 2 years
  • Greenfield airport at Navi Mumbai, Mopa (Goa) and some brownfield airports of Airports Authority of India (AAI) and 50 airports under the no-frills model will be developed all over the country, of which the same would be executed under the PPP model
  • Growth in aviation is also increasing demand for MRO (maintenance, repair, and overhaul) facilities
  • India plans to increase the number of operational airports to 250 by the year 2020

FDI POLICY

  • The extant FDI policy on Airports permits 100% FDI under automatic route in Greenfield Projects and 74% FDI under automatic route in Brownfield Projects. FDI beyond 74% for Brownfield Projects is under government route1
  • In order to aid the modernization of existing airports, and establish a high standard to help ease the pressure on them, it has been decided to permit 100% FDI under automatic route in Brownfield Airport projects1
  • As per the present FDI policy, foreign investment up to 49% is allowed under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline and regional Air Transport Service. FDI beyond 49% is allowed through Government approval. For Non-Resident Indians (NRIs), 100% FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49% of their paid up capital and subject to the laid down conditions in the existing policy1
  • Up to 100% FDI is permitted in non-scheduled air transport services under the automatic route
  • Up to 100% FDI is permitted in helicopter services and seaplanes under the automatic route
  • Up to 100% FDI is permitted in MRO for maintenance and repair organisations; flying training institutes; and technical training institutes under the automatic route
  • Up to 100% FDI is permitted in Ground Handling Services subject to sectoral regulations and security clearance under automatic route

1 – Investments are subject to relevant regulations, approvals from Directorate General of Civil Aviation (DGCA) and security and other conditions.

SECTOR POLICY

  • Airport Authority of India (AAI) is responsible for developing, financing, operating, and maintaining all public sector airports. New airports are permitted under the Greenfield Airport Policy 2008. Investment in airports is encouraged under the PPP Policy of the Government of India
  • Regional Air Connectivity Policy offers attractive incentives in the form of exemption of landing, parking and navigation fees to airlines operating at designated airports in non-metro areas

FINANCIAL SUPPORT

  • Aircraft engines and parts thereof are eligible for duty exemption when imported for servicing, repair or maintenance of aircraft used for scheduled operations
  • The budget envisages the development of new airports in Tier II and Tier III cities
  • The Income Tax Act provides presumptive taxation under Section 44AE in respect of assessees who are engaged in the business of plying, hiring or leasing goods carriages. The bill proposes to increase the amount of presumptive income to USD 112 per vehicle for all types of goods carriage vehicles
  • Exemptions under the Income Tax Act for infrastructure development under section 80 IA
  • Basic customs duty exemption is available for parts and testing equipment used for the maintenance, repair and overhaul of aircraft
  • Budgetary support is provided to the Airport Authority of India (AAI) for the development of airport infrastructure in the North-eastern states of India
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