CIVIL AVIATION: NEW ERA
BY R N Pathak,Director(PR),Indian Airlines

Civil Aviation sector in India is perhaps the most striking example of the progress made in the liberalisation of the Indian economy, a process that began a decade ago. Civil air transport business which hitherto had been the Government's monopoly has been completely liberalised, as a result of which private airlines have been flourishing. The process of disinvestment of Government equity in national carriers has been initiated, private participation for airports has been further liberalised and the bilaterals for operation of international services are being further encouraged. This in turn has opened up immense opportunities for investment in the civil aviation sector in India.

Highlights of Investments Opportunities Foreign Equity
Foreign Equity upto 40% and NRI/OCB investment upto 100% permitted in domestic air transport services. Equity from foreign airlines not permitted directly or indirectly.

Disinvestment of the Government Equity in airlines 
Government of India has decided to disinvest partly its shareholding in both Air India and Indian Airlines, presently wholly owned companies of the Government.
In the case of Air India, the shareholding of Government of India would be brought down to 40% and balance 60% will be allowed to be held by private entrepreneurs including upto a maximum of 40% by a foreign airline or a strategic partner.In the case of Indian Airlines, the shareholding of Government of India would be brought down to 49%. 51% of the equity will be divided among strategic partner, upto a miximum of 26%, and remaining 25% among Financial Institutions, employees and public. The Government have also decided that the strategic partner will be allowed the management control with autonomy in day to day operations.

Entry-Exit barriers removed
Barriers to entry and exit from this sector removed. Only pre-entry scrutiny to verify financial soundness, maintenance, security and safety aspects of operations and human resource development proposals. Choice of aircraft type and size left to the operator.

Private participation in Airports
Foreign equity participation allowed in ventures for airports, upto 74% automatic approvals and upto 100% with special permission. Participation also open to foreign airport authorities. A variety of fiscal incentives to be provided to airport project, as decided by Government from time to time. 100% deduction in profits for purposes of Income Tax for first five years.30% deduction in profits for Income Tax purposes for next five years. Full deduction to run for continuous 10 out of 20 fiscal years of assessee's choice. 40% of profits from infrastructure also deductable for financial institutions providing long term finance for airport infrastructure projects.

Bilaterals for operation of international air services
The Government has been more liberal in granting additional entitlements to foreign airlines both in terms of capacity as well as in terms of points of call. The existing air services agreement with United States of America is an extremely liberal one as it allows any number of US airlinesto operate services from/to India. US airlines are also allowed to decide the size of aircraft and their frequencies.

Taxes and Tariffs
In order to facilitate acquisition of aircraft Government of India have reduced tariffs for import of aircraft from 8% to Nil. Even aircraft taken on lease do not attract customs duties. India also has a liberal Corporate Tax/Income Tax regime for airlines and encourages investment by allowance of high depreciation rates.

Civil Aviation Policy
Having drawn up a successful growth model for the civil aviation sector, the Government is now engaged in evolving a comprehensive and integrated new civil aviation policy, some of the major highlights of which are :

All players and stakeholders are assured of a level playing field.

Private participation is encouraged and opportunities created for investors to realise adequate returns on their investments.

Rapid upgradation of airport infrastructure to world class is encouraged with priority to the busiest airports and those handling international flights.

International cooperation in aviation and development in tune with international trends and best practices, consistent with airspace sovereignty is promoted.

Conclusion
After four decades of control, Civil Aviation sector has been liberalised with a view to draw benefits of efficiency, safety andquality in service. Government has also opened doors to foreign participation in investment in this sector.