Monday, December 05, 2011

Prime Minister Manmohan Singh’s office wants examination of aviation fuel tax regime: Sources

Prime Minister Manmohan Singh’s office has written to the civil aviation ministry seeking a monthly action report. The office has also identified thrust areas to be monitored every month and the ministry has been asked to file a report on the fifth day of each month, according to sources.

Prime Minister Manmohan Singh’s office has written to the civil aviation ministry seeking a monthly action report. The office has also identified thrust areas to be monitored every month and the ministry has been asked to file a report on the fifth day of each month, according to sources.

The thrust areas include examination of tax regime on aviation turbine fuel, putting in place the economic regulation for airline pricing within six months, framing a taxation policy for airport tariffs within three months and finalising the Civil Aviation Authority of India Bill within six months.

Airline chiefs met with prime minister Manmohan Singh last month. They sought rationalisation of taxes on jet fuel that accounts for a significant portion of the revenue. Domestic airlines like Kingfisher, Jet Airways and Spicejet have all reported losses due to high cost of operation.

Meanwhile, the finance ministry has agreed to the proposal of allowing 26 per cent foreign direct investment by foreign airlines in the private carriers. The ministry has put a rider that such investments should not violate Securities and Exchange Board of India’s takeover code. Any potential buyer who acquires more than 25 per cent in a listed company, has to make an open offer for all shareholders.

Kingfisher Airlines is looking to raise working capital and wants the government to open up the domestic aviation sector for foreign investors. Both Kingfisher and Spicejet have publicly stated that they would welcome FDI in the space.

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