India budget gives boost to aviation sector

New Delhi, Mar 16 (PTI) The Indian airline industry today got a major relief with the government allowing it to raise capital through external borrowings worth USD one billion for a year, as it planned to allocate Rupees 40.0 billion (USD 800 million) to the ailing state carrier Air India. In a bid to encourage the nascent maintenance, repair and overhaul (MRO) sector, it also proposed to allow full exemption from customs duty and countervailing duty to aircraft spares, tyres and testing equipment. Introducing the budget for fiscal 2012-13 beginning April 1, Finance Minister Pranab Mukherjee acknowledged that the airline industry was facing a financial crisis and the high operating costs of the sector was "largely attributable" to the jet fuel cost. "To reduce the cost of ATF, Government has permitted direct import of ATF by Indian carriers, as actual users." In order to address the immediate financing concerns of the civil aviation sector suffering from a major capital scarcity, he proposed to permit "External Commercial Borrowings (ECBs) for working capital requirements of the airline industry for a period of one year, subject to a total ceiling of USD one billion." He also said that a proposal to allow foreign airlines to participate up to 49 per cent equity of an airline company, operating scheduled or non-scheduled services, was "under active consideration of the government." While the central plan outlay for the Civil Aviation Ministry in 2012-13 is estimated at Rs 72.93 billion (nearly USD 1.46 billion), a demand for plan allocation of Rs 40.0 billion (USD 800 million) to the state-owned carrier Air India in the next financial year has also been proposed in the budget. Noting that India had the potential to establish itself as a hub for third-party Maintenance, Repair and Overhaul (MRO) of civilian aircraft, Mukherjee said to realise this potential, spare parts of aircraft, new and retreaded tyres and testing equipment would be fully exempted from basic customs duty and countervailing duty. In a sop to Indians travelling abroad, he also proposed to raise the duty-free baggage allowance, which was last revised in 2004, from Rs 25,000 (USD 500) to Rs 35,000 (USD 700) and for children of up to 10 years from Rs 12,000 (USD 240) to Rs 15,000 (USD 300). PTI