Airline CEOs bat for tax reduction on sector
PremiumIndian airlines have been largely been loss making due to the high taxation regime. The rise in jet fuel price, due to rising oil prices, is further expected to hurt the sector.
HYDERABAD : Top airline chief executives on Friday said that the government will need to bring down taxes and include jet fuel under Goods and Services Tax (GST) regime for airline sector to really kick off in the country.
Speaking at a chief executive's panel discussion at the Wings India 2022 event, IndiGo's chief executive Ronojoy Dutta said that the sector has been seeing a profitless growth for a long time.
"We take 21% as tax to government. This issue needs to be addressed immediately," Dutta said.
Indian airlines have been largely been loss making due to the high taxation regime. The rise in jet fuel price, due to rising oil prices, is further expected to hurt the sector.
Airlines were blindsided by record hike in jet fuel prices on 16 March, which promises to put a severe strain on their financials. In New Delhi, jet fuel price rose by a record 18.3% to ₹1,10,666.29 per kilolitre, crossing the ₹1 lakh mark for the first time. Prices in Kolkata, Mumbai and Chennai rose to ₹1,14,979.70, ₹1,09,119.83 and ₹114,133.73 per kilolitre, respectively.
"It's counter intuitive that country that aspires to be global aviation leaders handicaps it's airlines. Fact that little assistance was provided during covid
It's been extremely difficult," said Ajay Singh, chairman and managing director of SpiceJet Ltd.
Singh said that airlines also face other challenges due to their financial conditions as banking sector often don't lend carriers, or give them future credit.
We all live on hope, Singh said adding that he expects things to change in future.
"We need to get cost base right," Singh added.
Meanwhile, Sunil Bhaskaran, the chief executive and managing director at AirAsia India, compared the steel sector with aviation.
The former Tata Steel official said that while demand is good, and Indian airlines are efficient, they are saddled by high cost and taxes regime.
"Largely all of us have leased aircraft. The ecosystem of lessors supports an airline. But the risk is when some airline goes down, it's a big number that goes down. And in India this has happened in the past," Bhaskaran added.
Indian airlines also face the twin challenge of earning in rupee, especially on domestic front, while a large chunk of its costs is paid off in US dollars, said Vinod Kannan, chief executive of Vistara, a joint venture between Tata Sons and Singapore Airlines.
"The math doesn't make sense. But, still here we are, we are eternal optimists and we have weathered the storm partly from the support of Indian customers. But there is definitely hope at the end of the tunnel," Kannan added.
Indian airlines are expected to report a combined net loss of ₹250-260 billion in FY2022, and would require additional ₹450-470 billion between FY2022 and FY2024 to sustain operations, according to credit rating agency Icra.
However, Satyendra Mishra, a joint secretary with the Ministry of Civil Aviation (MoCA) said that taxation has reduced over a period and airlines survived high fuel costs in 2013-14.
"We are hopeful that sector is resilient and will see growth. Government is aware of the constraints. Facilitating on all fronts that this industry can survive," he said.
"Airlines will have to think of efficiency of airplanes. Government is providing all kind of support. We are working on all fronts. Definitely solutions will come," he added.
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