The Indian aviation industry is facing a tough time due to the sky-high prices of jet fuel. The Union Budget 2024-25 is just around the corner, and the industry is hopeful for measures to ease the burden of costs related to aviation turbine fuel (ATF). In addition, there is a push for a lower duty structure on the import of private aircraft, categorization of airports under priority sector lending, and more initiatives to enhance regional connectivity in India.
Reducing Import Duty on Aircraft
Harsh Vardhan Sharma, president of the Business Aircraft Operators Association, highlighted the significant hurdle faced by the industry due to the 3% import duty on aircraft. This duty, in place for 15 years, has led to an increase in the cost of imports, making it very expensive. There is a strong call for the government to abolish this duty, as it has outlived its utility.
Impact of Jet Fuel Prices on Airlines
The expenditure on jet fuel for Indian airlines accounts for almost 40% of their total expenses, significantly higher than the global average of 20-25%. While there was a sequential decline in ATF prices until June 2023 in the current financial year, they remained elevated compared to pre-pandemic
levels. As of January 2024, the prices were over ₹1.01 lakh per kilolitre, significantly higher than the ₹64,000 in 2019-20.
Expectations from the Union Budget
The Indian aviation industry is looking forward to a rationalization in the duty structure of aviation turbine fuel and its inclusion under the goods and services tax. Additionally, there is a call for a broader policy framework that indirectly affects the cost of ATF, such as central excise duties and customs duties. These steps could potentially lead to a domino effect, increasing air travel frequency, boosting airport
revenues, and enhancing connectivity to various tourist destinations.
Support for Airports and Aircraft Manufacturing
The airport sector hopes for the categorization of airports under priority sector lending to reduce the cost burden for creating new infrastructure. Companies involved in aircraft and engine component manufacturing are optimistic about incentives to boost the supply chain in the aviation ecosystem in India, especially with over 1,600 aircraft on order.
Boosting the Drone Industry
The emerging drone industry also seeks more policy and fiscal measures to establish India as a drone hub by 2030. There are expectations for policy measures and fiscal incentives to establish India as a global drone hub, with a focus on research and development, along with incentives for technological collaborations, essential for propelling India’s drone manufacturing capabilities to new heights.
The Indian aviation industry is at a critical juncture, grappling with high jet fuel prices and seeking support from the upcoming Union Budget 2024-25. The industry’s requests range from the rationalization of duty structure on aviation turbine fuel to incentives for boosting the supply chain in the aviation ecosystem and establishing India as a global drone hub. These measures, if implemented, can provide significant relief and foster growth in the aviation sector.