As cash reserves of aviation sector companies are “running down quickly” as planes are grounded amid the coronavirus pandemic, industry body FICCI on Wednesday recommended several measures to Finance Minister Nirmala Sitharaman and Civil Aviation Minister Hardeep Singh Puri to help aviation firms.
FICCI stated in its letter that the government needs to give appropriate directions to the Reserve Bank of India to ensure that the operation of existing “stand-by letters of credit, other foreign guarantees and bank guarantees etc. issued by Indian airlines operators or their banks” are suspended with immediate effect for a period of 90 days.
In its letter to both the ministers, the industry body stated that interests, penalties, delayed charges and accruals to airport operators should be waived for the airlines, and subsequently, airport operators could be adequately supported by the government to make up for the gap.
“One of the major challenges faced by the aviation industry is that cash reserves are running down quickly as fleets are grounded and flights are not operational in the past few days. Many airline companies are almost at the brink of bankruptcy,” stated the letter written by Anand Stanley, Chairman, FICCI Aviation Committee.
Anand Stanley is also President and Managing Director of Airbus India and South Asia.
The liquidity position of all airlines will be benefited, if the “interest-free unsecured credit period” for payment of fuel charges to oil marketing companies is enhanced to 180 days from the current 21 days, Stanley noted.
The government has imposed a 21-day lockdown to curb the spread of the novel coronavirus, and domestic and international commercial passenger flights have been suspended for this period. Many other virus-affected countries have taken similar measures.
However, cargo flights, offshore helicopter operations, medical evacuation flights and flights that have gotten special approval from aviation regulator DGCA are permitted to operate during the flight ban.
“Airline cancellations far outstrip any fresh ticketing; airlines thus have negative sales during COVID-19. This results in Airline GST refunds being higher than the GST due. It is recommended that the Indian government consider deferment of payment of GST for the airline industry,” Mr Stanley stated.
Aviation turbine fuel (ATF) may be brought under the ambit of GST as for any airline in India, the cost of ATF constitutes about 40 per cent of the total operational cost, he mentioned.
“Presently ATF attracts excise duty at the rate of 11 per cent and VAT (which varies from state to state) up to 30 per cent. Airline companies may be allowed to take input credit of GST paid on ATF resulting into reduction in the cost of operation,” Stanley recommended.
In his letter to both the ministers, Mr Stanley also recommended waiving parking and landing charges and royalties that are paid by the airlines to the airports.
“The government could undertake some policy measures for at least 20 per cent contribution towards the total salary bill of employees with a gross salary of Rs 30,000 or less per month. The list of employees should be as per the pay-out made for month of February 2020,” he said, adding that this step would help aviation sector companies retain their employees despite current headwinds.
Till now, around 1,600 people have been infected by the novel coronavirus and 38 people have died due to it in India, according to Union health ministry.