Airport Privatisation, Tax Break For Aircraft Leasing Firms Find Mention In Budget2021

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File photograph of Union Finance Minister Nirmala Sitharaman in New Delhi. Source: PIB

Unionn Finance minister Nirmala Sitharaman in Monday’s Budget speech said that more airports “will be monetised for operations and management concession,” including those in smaller cities and will be run in a Public Private Partnership (PPP) model.

The Finance Minister also proposed aircraft leasing companies setting up bases in Ahmedabad’s GIFT City will get a tax holiday on capital gains and tax exemption for aircraft lease rentals paid to foreign lessors.

Airport Privatisation: Better Passenger Experience

The Times of India reported that this would result in flying in and out of Varanasi, Bhubaneswar, Raipur, Indore, Amritsar and Trichy along with a number of small airports currently run by the Airports Authority of India (AAI) soon becoming a better experience for passengers.

The budget also proposed aircraft leasing companies setting up bases in Ahmedabad’s GIFT City will get a tax holiday on capital gains and tax exemption for aircraft lease rentals paid to foreign lessors.

Aviation analyst Vinamra Longani said that the proposed tax holiday for aircraft leasing firm’s based in Gujarat International Finance Tec City or GIFT City, near Ahmedabad is an encouraging step in the right direction. “However, we must wait for details to be able to ascertain the impact of this announcement,” he Tweeted.

A senior AAI official was quoted by The Times of India as saying that the next lot of airports to be given for PPP operations are Varanasi, Bhubaneswar, Raipur, Indore, Amritsar and Trichy.

“They will be given to PPP players by clubbing with smaller airports. Which means a corporate entity taking over one of these six airports will need to take small airport/s too. The (names and numbers of) smaller airports has not been finalised yet,” the official said.

The government has in last two years completed the process of giving Jaipur, Guwahati, Thiruvananthapuram, Mangaluru, Lucknow and Ahmedabad to infra major Adani group. The Finance Minister said the divestment of Air India and Pawan Hans Helicopters will be completed in the next fiscal.

Air India Asset Holding Limited (AIAHL), to which AI debt has been transferred, has been allocated Rs. 2,269 crore in FY 21-22 and the regional connectivity scheme has got Rs 600 crore. Public health units at ports of entry, including 32 airports, will be strengthened next fiscal as part of enhanced screening during the pandemic.

In a first, Rs. 1 crore has been allocated to room aero-sports like skydiving in India.To make the International Financial Services Centre (IFSC) in Ahmedabad’s GIFT City a global financial hub, the Finance Minister has proposed to include tax holiday for capital gains or aircraft leasing companies based there and also give them tax exemption on aircraft lease rentals paid to foreign lessors.

At present, all Indian airlines have leased aircraft from foreign countries like Ireland and Singapore and payments made in forex. Indian airlines have over 800 planes currently on order that are to be delivered in the next four to five years.

Remi Maillard, president and MD of Airbus India and South Asia, was quoted by the Times of India as saying that the proposed tax exemption on aircraft leasing will “provide some relief to Indian carriers which are bleeding cash because of the COVID-19 pandemic… sits well with India’s desire to develop a local aircraft leasing and financing industry… (It) willl help grow the fleet size in India as a vast majority of these aircraft will likely be leased.”

Mr. Maillard, however, cautioned that the aviation industry and said: “Is not out of the woods yet and continues to hope for financial and policy support from the government (like) immediate credit support, lower tax rates on aviation fuel and imported aircraft parts for MRO. Given the symbiotic relationship between aviation and economic growth, continued government support to the sector can only catalyse the country’s expansion and accelerate it towards achieving a $ 5 trillion economy by 2024,”