• DGCA asks aircraft leasing companies to pay more tax on imported planes

    In what could be a blow to the regional connectivity scheme, the aviation regulator has stalled the entry of aircraft leasing companies into India by asking them to pay higher duties on imported planes.

    The civil aviation ministry, which has been actively pushing for air connectivity to small cities and towns, now plans to take up the matter with the finance ministry to find a solution.

    According to government rules, any company importing an aircraft has to inform the regulator whether it is bringing the plane for non-scheduled operations or personal use.

    The rule does not mandate that the company importing the aircraft has to operate it —so, a leasing company can import aircraft in its name and lease to airlines involved in commercial operations.

    The duty on aircraft imported for nonscheduled operation is just 2.5 to 3 per cent, but it is steeper at 19-21 per cent for those brought in for personal use. Leasing companies, which plan to import aircraft and lease them out to local operators, have sought approval to pay duties at the lower rate.

    But the Directorate General of Civil Aviation (DGCA) has blocked it by arguing that these companies may avail of the lower rates but use the aircraft for personal use, as there is a precedent.

    “In the past, we had come across violations by operators, who import aircraft on the pretext of non-scheduled operations but use it for personal use. This way, they save a lot of money by paying less duty on it,” said a DGCA official, who did not want to be named.

    One cannot guarantee that these aircraft would not be used for personal flights, added the official. Barring aircraft leasing companies from entering India could hamper prospects of the regional connectivity scheme, whereby the government aims to connect unserved and underserved airports.

    It has decided to fix fares at Rs 2,500 per hour of flight and compensate the airlines through a subsidy for operating flight which may not be commercially viable.

    “We had discussions on the issue. We are writing to the revenue department and get the issue addressed,” Aviation Secretary RN Choubey told ET. He said there was a need to address the tax rule for leasing companies to shift base to India.

    “No leasing company would come if they are asked to pay higher duties,” Choubey said.

    To make the regional connectivity plan a success, the government is working to make aircraft available for scheduled commercial operators — regional operators who will launch regional flights.

    The government has also allowed foreign-registered aircraft to be operated in India, on the request of aircraft leasing companies. The government will open the bids to operate regional flights next week and expects the flights to start in February.

    Till last Thursday, the aviation ministry received bids from 60 companies to operate flights on 600 regional routes.  Demetrius Harris Jersey

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