Wednesday, October 4, 2023

Indian Aviation Industry Suffered A Rs. 24,000 Crores Loss In 2020-22

By Aritra Banerjee

The Indian aviation sector has suffered a staggering Rs. 24,000 crore loss over the past two fiscal years, according to the Union Ministry of Civil Aviation (MoCA). During FY 2020-21, the industry saw a loss of Rs. 12,479 crores; in FY 2021-22, the loss stood at Rs. 11,658 crores.

In response to the Lok Sabha on 2 February 2023, the Ministry highlighted various initiatives the Centre took to support the aviation industry. One of these was the reduction of Value Added Tax (VAT) on Aviation Turbine Fuel (ATF), which was achieved through engagement with state governments and union territories that had levied high VAT on ATF. As a result, 17 states and union territories reduced their VAT on ATF.

Additionally, the Ministry revealed that the Goods and Services Tax (GST) rate for domestic Maintenance, Repair, and Overhaul (MRO) services was reduced from 18% to 5%. The Airports Authority of India (AAI) and other airport developers are also set to target a capital outlay of Rs. 98,000 crores over the next five years for expanding and modifying existing and new terminals, along with the strengthening of runways and other vital activities.

The Centre has also approved the Emergency Credit Line Guarantee Scheme (ECLGS) for the aviation sector, per the Ministry. The ECLGS has been enhanced to provide credit support of up to 100% of the total credit outstanding (both fund-based and non-fund-based) to aviation companies, subject to a cap of Rs. 1,500 crores per borrower or whichever is lower, based on industry demand.

Despite the support measures, the allocation to the aviation sector in the Union Budget FY23-24, presented by Finance Minister Nirmala Sitharaman, has halved to Rs. 3,113.36 crores, of which Rs. 3,026.70 crore is for revenue and Rs. 86.66 crore is for capital.

The Finance Minister has announced the establishment of 50 new airports and water aerodromes, as well as the revival of advanced landing gears, to improve regional air connectivity and boost domestic tourism and travel. The government has also unveiled plans to develop 50 tourist destinations and launch sector-specific skilling and entrepreneurship development schemes such as the Swadesh Darshan Scheme.

ICRA, the rating agency, has expressed that the budget allocation to the aviation sector is aimed at boosting domestic tourism and travel. The firm notes that the Union Budget for FY2023-24 has emphasized its focus on improving regional air connectivity through establishing 50 additional airports, heliports, water aerodromes, and the revival of advanced landing grounds, which will drive growth in domestic air travel.

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