Budget 06-07: Not much to cheer

No major step to boost domestic aviation announced

BY A CORRESPONDENT
March2, 2006

Domestic aviation companies will get some relief for aircraft lease, while upper class international air travel is set to become costlier, according to the Union Budget proposals. The economy classes are spared, but first and business class international travel will cost more.

Contrary to expectations, there was no lowering of duty on aviation turbine fuel (ATF). There was also no major announcement to boost India's growing aviation industry. While infrastructure received major Budget thrust in developing tourism, surface transport and telecom, aviation has not received any budgetary largesse.

However, Indian airlines can enjoy one more year of tax exemption on lease payments for an aircraft or aircraft engine from abroad. This was originally available only if the lease agreement was inked before April 1, 2006. Now this will be available for one more year.

The tax, that could be as high as 42% depending on which country the aircraft or engine is being leased from, was to come into effect from April 1. This will benefit almost all the domestic airlines including Jet Airways ,Indian Airlines, Spice Jet and Air Deccan.

Indian Airlines is looking to lease 10 aircraft including five widebody aircraft. Air Deccan this year alone has signed lease agreement for seven Airbus A-320 aircraft.

IA will also get a Budgetary support of Rs 325 crores and this will be utilised by IA to finance its fleet acquisition plan. The purchase agreement with Airbus was signed by IA during the recent visit of the French President.