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For that feeling of expansive lightness
September, 25th 2006
About a year ago, the International Air Transport Association ( identified `Five challenges for a successful Indian air transport sector'. These were: "(1) enhancing safety, (2) urgent infrastructure improvement, (3) reasonable taxation, (4) commercial freedom, and (5) simplifying the business through effective use of technology." While it may take a while to see things happening on most of these challenges, it is reasonable to expect taxation to be reasonable, as IATA urges. "Air transport pays for its own infrastructure - a total of $42 billion each year. In respect of this, international air transport is exempt from taxation," informs the international body. "We are happy the Indian government abolished the fuel uplift levy in 2002. But we are disappointed that, to date, the $36 million collected by this levy still has not been returned to the airlines. We urge the timely resolution of this issue," is a quote of IATA Director General and CEO, Mr Giovanni Bisignani cited in the communiqu. He had also opposed the imposition of 10.2 per cent service tax fee on landing, airport and air navigation fees. "This reduces the competitiveness of India's air transport sector. India needs a common-sense approach to taxation," said Bisignani. Taxes or charges collected should be transparent and re-invested in the sector, he insisted. And service tax levies have been on the ascent, please note. Interestingly, there are voices from within the Government too, protesting against excessive service tax levy on the airline industry. "The Civil Aviation Ministry in India has expressed concern over the impact of imposition of service tax on air travel on tour and travel business," says in a report dated September 19. "It is proving to be a big hurdle in increasing the tourist inflow and promoting the civil aviation industry. Hence, we will ask the Finance Minister to review the decision to impose service tax," reads a quote of the Civil Aviation Minister, Mr Praful Patel, cited in the story. "Airlines fear the 12.24 per cent service tax may push passengers to buy tickets abroad and it is also being felt that proposal could also see passengers opting for economy class on short-haul flights," is more from the story. A clear red flag on the quantum of tax that airline consumers suffer is what stares at one from the fare. For instance, "Rs 6,954 (Rs 4,974 + Rs 1,980 taxes & fees)" reads the start of a listing on for Mumbai-Delhi. But this is only the visible component. Taxes that the common flyer doesn't see continue to bleed the industry, be it on fuel or in the form of other taxes and fees. Sales tax on fuel is said to vary widely, between 4 per cent and almost ten times that. And instances aren't rare where the tax element, comprising surcharge and the fixed passenger service fee (PSF), can exceed the basic fares! Just the recipe, this is, to push the marginal traveller out. No wonder, therefore, the IATA recently revised its profitability outlook for the Asia-Pacific region downward by $300 million. Meanwhile, in the US, the airline industry has been pressing for `reprieve on fuel tax to ease the financial strain,' as one learns from a September 2005 posting on `Airline tax to fight disease,' reads a headline in The Age, Australia, top in Google News at the time of writing. It seems leaders from several nations have launched `a global initiative' for `an airline tax to raise money to fund treatment for deadly diseases in developing countries.' Likewise, Peninsula On-line, Qatar, has a story saying that a dozen countries agreed in March `to join France in imposing a tax on airline tickets to fund HIV/Aids, tuberculosis and malaria eradication programmes.' Wonder if that can add to a feeling of expansive lightness to air travel. Lightness of the wallet, possibly, even as the industry labours on under the load of chronically high taxes. D. Murali
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