Jayant Nadkarni: Irrational duty structure is the biggest obstacle

India has a constrictive regulatory environment, high charges and lack of infrastructure at major metro airports

Jayant Nadkarni, president Business Aircraft Operators’ Association (BAOA), has actively lobbied for chartered operators and believes that the irrational duty regime imposed is to punish the rich, not to protect any local aircraft building industry. This government will hopefully provide relief to a sector, which is slipping, he says in an interview with Nirbhay Kumar. Excerpts:

Business aviation companies have complained of excessive regulatory environment. Do you agree?
Yes, but regulation is not a problem per se. Our complaint is that we have a regulatory environment skewed towards larger aircraft & scheduled airline operations with which we are clubbed. While we have lately also been seeing positive intent amongst the regulators to set things right, this is not yet broad-based across different departments and regions. This collaborative culture can seep through only by institutionalising a process of periodic and regular interactions between the regulator and industry. Incidentally this is also prescribed by the ICAO as important for morale and safety.

It seems that the sector has ceased to witness high growth as seen in 2007-08. What could be the possible reasons?
The sector was witnessing double-digit growth up until 2006-07, riding on a growing economy and investments. This growth started sloping down after 2007 when an irrational import taxation regime was imposed. There is sharp co-relation with this specific event. Of course, we have also had a constrictive regulatory environment, high charges and woeful lack of infrastructure at major metro airports. But the single biggest cause for negative growth of our industry is the irrational duty regime imposed on us.

There is general belief that general aviation/ business aviation (GA/BA) is for serving the uber rich justifying the punitive taxation regime for it.
Yes, we are fighting a major perception problem in India. The fact is that business aircraft are not just luxury items. On the contrary, they are the sole means for quick and flexible connectivity to inaccessible areas. Let’s draw a comparison. Scheduled airlines are now a `necessity’ for the vast professional middle class in India, not just a luxury. In much the same way, business aircraft are a `necessity’ for captains of the industry, who have a real need to optimise time and be as productive as possible. Only then can they better contribute to their own businesses and to the nation’s economy as a whole. This raw fact is not appreciated by everyone and led to the previous government slapping a punitive import taxation regime on business aircraft without realising how it will also hurt the common man due to the drag it creates on the nation’s economic growth. In fact this duty imposition was done in an arbitrary manner without any calculation, logic or basis. It was done to punish the rich, not to protect any local aircraft building industry. For example, one can understand there is a high duty on import of foreign cars as there is a local automotive industry to protect. There is no local civil aircraft building industry to protect. Then, why have any duty at all? Why not abolish it and encourage the industry? Scheduled airlines face nil customs duty on their aircraft imports. Contrast this with GA/BA. As per the current taxation policy, we end up paying close to 21 per cent custom duty to import an aircraft under private category, and 2.5 per cent under commercial (NSOP) category. Both these categories comprise the gamut of business aviation activity. It is just that a private category aircraft is used more extensively by its owner who prefers not to give it out on charters. If both categories, private and commercial, contribute positively to the economy, then why have any import duty at all? We have presented this case to the government and hope for a positive appreciation.

The government has proposed to offer a lot of incentives in terms of zero VAT on fuel at no-frill regional airports and reduced landing and parking charges, among others. Do you think these moves would encourage GA/BA companies to participate in the government's bid to take 300 million people to skies?
MoCA has presented a very well drafted policy document. It has certain gaps when we talk of small aircraft operations and we are giving our feedback to the ministry. So long as these gaps are covered and the follow on rules are simple, user friendly and transparent, we should see positive results. The potential is there to hit 300 million air travelers, given the visionary policy directions. However, the devil always lies in the details. So we need to see the final policy shape, then we need to see the final rules and regulations that DGCA rolls out as a follow through to the policy.

Do you think more sops are required to attract GA players in this exercise?
More GA players will be attracted if they see a conducive final policy and conducive final rules from DGCA as a follow through to the policy. There are many GA players waiting and watching.

Friday, 20 November, 2015
Financial Chronicle