NEW DELHI: The Civil Aviation Ministry on Tuesday announced that the Central government is working on a relief package for crisis-ridden domestic airlines, which would focus on reducing the carriers’ operational costs.
“Air India will raise Rs 2,100 crore in government-guaranteed borrowing. The loan will be extended by the State Bank of India. The government has approved Rs 860 crore as equity infusion for the state-owned carrier for the ongoing financial year,” Civil Aviation Secretary R N Chaubey told reporters on the sidelines of an event in New Delhi.
According to sources, Civil Aviation Minister Suresh Prabhu had met Finance Minister Arun Jaitley last week and deliberated at length about the financial health of domestic airlines, including that of Air India. Officials said that both the ministries had put rising prices of Aviation Turbine Fuel (ATF) as one of the reasons behind mounting losses.
As bringing ATF under the GST slab had not been possible so far, the ministers had talked of reducing excise duty from 14 per cent to 8 per cent. Moreover, the aviation ministry also wanted to allow overseas loans for working capital requirements.
Rising oil prices and a weak rupee have badly affected the financial health of domestic airline companies in the country. Many airlines have reported losses in their recent financial results.
While Jet Airways posted a loss of Rs 1,323 crore in the June quarter of the current financial year, budget carrier SpiceJet, after seeing profits for 13 consecutive quarters, reported a loss of Rs 38 crore during the same period. Similarly, IndiGo, the country’s largest commercial airline, reported 97 per cent decline in profits during the quarter.
The Civil Aviation Ministry, which has closely observed the results, is of the view that bringing ATF under GST would help the loss-making carriers.
According to Sydney-based Centre for Asia Pacific Aviation, the Indian airline sector is expected to report $1.65 billion-1.90 billion in losses in FY 2018-19, up from its own previous estimate of $430 million-$460 million.
Sources said Prabhu had also talked about growth plans for the aviation sector, including construction of 100 airports at an estimated cost of $60 billion (about Rs 4.2 lakh crore) in the next 10-15 years through public private partnership.
Burdensome policies
IATA chief Alexandre de Juniac on Tuesday said government policies are imposing “excessive costs” on airlines in India and infrastructure constraints are limiting growth. He said GST on international air tickets violates ICAO principles.