“The service tax on tickets, the high jet fuel prices due to taxation which account for 45% of the Indian aviation industry’s cost in comparison with 30% for airlines in other parts, should be reduced or eliminated,” IATA director general and CEO Tony Tyler said
Geneva: Global airlines body International Air Transport Association (IATA) today asked Indian government to set the country’s aviation industry free by expeditiously reducing taxes, especially those on jet fuel, instead of “micro-managing” the cash-strapped sector, reports PTI.
“The service tax on tickets, the high jet fuel prices due to taxation which account for 45% of the Indian aviation industry’s cost in comparison with 30% for airlines in other parts, should be reduced or eliminated,” IATA director general and CEO Tony Tyler said here.
“Indian government should focus on safety, security and commercial freedom of the industry and not indulge in micro-management of the industry through (checks) on ticket pricing,” he told the global briefing of IATA here.
“We urge the Indian government to set the aviation industry free (from policy interventions like checking airfares). Concentrate on building infrastructure and the air navigation system. There is a lot the Indian government can do,” he said, adding that the state taxes on jet fuel were having “a significant drag on the Indian carriers”.
In India, the aviation industry contributes 5% of the gross domestic product (GDP), around Rs291 crore in tax contributions, provides four million jobs and another seven million jobs through tourism and related activities, he said.
“We hope these numbers will have a good impact on government policies,” Mr Tyler said in reply to questions. “We have good relations with the Indian authorities and are seeking to persuade them of the benefits that can be derived from the civil aviation industry.”
Maintaining that the Eurozone crisis was bound to hit the markets in Asia and other parts of the world soon, the IATA chief warned of deep losses for the global airline industry next year if the European economic situation continued to be grim.
In the context of high taxes on the aviation industry, Mr Tyler said “cash-strapped governments implementing austerity measures are seeing aviation as a soft target for new or increased taxation...”
Understanding that aviation’s connectivity is the lifeblood of the global economy should lead politicians to make it cost efficient as possible in order to reap the economic benefits that it facilitates.”
Giving an example of the Netherlands, Mr Tyler said the Dutch government which had raised Euro 300 million though passenger departure tax, repealed the tax when they found that “it cost the economy Euro 1.2 billion in lost economic activity. Other governments should take note”.
Regarding capacity building and infrastructure, the IATA chief said some governments saw privatisation as a solution, but “we are agnostic on whether a facility is government owned or in private hands. What is important is the regulatory structure, it must follow the International Civil Aviation Organisation principles especially transparency and consultation with users”.
IATA’s chief economist Brian Pearce said the Asian region was the weakest in air freight markets this year as the Asian economies were witnessing a fall in demand from developed economies for goods manufactured in Asia.
Asia-Pacific airlines have seen a sharp fall in profits because of the importance of cargo in the region, he said.
Mr Pearce said the IATA forecast for 2012 was that the high jet fuel prices and a weakening economy would lead to lower airline profits next year, “We forecast a fall in net post tax profits from $6.9 billion in 2011 to $3.5 billion in 2012”.
The face saving act by the Manmohan Singh-led UPA government and the show of strength by the opposition seems to have defeated and denied consumers a chance to buy good quality items at reasonable rates
The deadlock in Parliament created on the issue of allowing 51% foreign direct investment (FDI) in multi- brand retail and 100% FDI in single-brand retail was finally broken when the Union government led by Dr Manmohan Singh decided to put on hold its decision on FDI in retail.
While the political parties may have their reasons for opposing the decision by putting it on back-burner the government has denied a fair chance to consumers to buy at reasonable price. The sad part is that the proposal comes after nearly 14 years when the government first liberalised FDI in the trade sector by permitting 100% FDI in ‘cash-and-carry wholesale trade and nine years later, 51% FDI in ‘single brand retail’ segment.
“We don’t expect the government to revive this (FDI in retail) legislation anytime soon given the lack of numbers and impending state government elections in the next 12 months. We expect the proposal to remain in cold storage and meet the same fate, which several other government proposals like the urea policy, goods and services tax (GST), direct taxes code (DTC) and land acquisition have met. We will be positively surprised if it goes through during the tenure of the current government,” said Prabhudas Lilladher Pvt Ltd in a research note.
The government’s decision not only brought forward the differences between political parties, but also showed different tones of industry bodies. Initially, the Confederation of Indian Industries (CII) took a cautious approach by calling for a calibrated approach for introducing FDI in the retail sector in terms of the percentage and minimum capitalisation requirements. On the other hand, the Federation of Indian Chambers of Commerce and Industry (FICCI) welcomed the decision and said that it would create big employment opportunity in the country.
Within a day CII came out strongly in support of FDI in retail. In a release, it said, “FDI in multi-brand retail will give a boost to the organised retail sector, which positively impacts several stakeholders including farmers, consumers, MSMEs and hence, the overall economy.”
FDI in retail would not only have brought more investment in the sector but would also have brought higher efficiency and more jobs. The Indian retail sector requires a new level of efficiency in the chain that will bring higher value to farmers, create millions of new jobs in the organized sector, and lower prices for the final consumer.
From the farmers perspective, organized retail has the potential to drive efficiencies in this chain by increasing price realization for farmers by 10%-30% through sourcing directly or closer to the farm, by reducing handling and wastage by 25%-50% through consolidation as well as investments in technology, either directly or through aggregators and by upgrading the farmer’s capabilities by providing know-how and capital. However, this would be distant dream now.
While there is a remote possibility that this decision would become reality through some give and take or appeasement of allies, watering down of the proposal, evolving a consensus amongst all stakeholders is a cumbersome process and will take its own time. Going by the fate of several other policy proposals, it would be a big surprise if the proposal goes through during the remaining term of the Manmohan Singh government.
According to a CII study, opening up of FDI in retail can increase organized retail market size to $260 billion by 2020. This would result in an aggregate increase in income of $35–$45 billion per year for all producers combined; 3-4 million new direct jobs and around 4-6 million new indirect jobs in the logistics sector, contract labour in the distribution and repackaging centres, housekeeping and security staff in the stores. The government also stands to gain by this move and can be expected to receive an additional income of $25-$30 billion by way of increased tax collection and reduction of tax slippages, the study said.
Organized retail share in countries of comparative development such as China and Malaysia is much higher. For instance, in China, the organized retail is estimated at 20% of the total retail sales, whereas in India, it stands at a miniscule 4%. Other South East Asian countries, too, have much larger shares with Indonesia at 30%, Thailand at around 40% and in Malaysia as high as 55%.
A doctor, an engineer, and a politician were arguing as to which profession was older. The doctor said, “Well, without a physician mankind could not have survived, so I am sure that mine is the oldest profession.” “No,” said the engineer, “before life began, there was complete chaos and it took an engineer to create some semblance of order from this chaos. So engineering is older.” “But, who created the chaos?” the triumphant politician calmly said. Chaos appears to be indeed ‘made by politicians’, as one can see.
According to Dr Swamy, former prime minister Rajiv Gandhi and his family has accounts abroad where they may have kept black money. He even alleged that Mr Gandhi was detained in the US for carrying $160,000 in cash without the mandatory declaration
Janata Party president Dr Subramanian Swamy has asked the Central Bureau of Investigation (CBI) to provide information on the black money account of the Gandhi family. In a letter written to AP Singh, director, CBI, Dr Swamy provided information relating to the disclosure of offences committed under the Prevention of Corruption Act (PCA) about three incidents and requested the agency to record it as part of the first information report (FIR).
In the letter, Dr Swamy said, in November 1991 issue, Schweitzer Illustrate had published an article disclosing that former prime minister Rajiv Gandhi had about $2 billion in secret bank accounts in Switzerland. “Although the information is two decades old, you are aware that there is no time limitation for corruption cases under the PCA. Also even if Rajiv Gandhi is now deceased, his likely beneficiaries are his wife, Sonia, and two children, two of whom are public servants,” the letter said.
Dr Swamy also said that Russian spy agency the KGB had paid some money to Mr Gandhi and his family. According to the letter, Russian scholar Dr Yevgenia Albats, in her book, ‘A State Within a State: KGB in Soviet Union’ disclosed the file numbers that contain evidence of the KGB payments to the then prime minister Mr Gandhi and his family members. In 2002 the then external affairs minister Jaswant Singh had taken this matter up with the Russians and was informed by the Russian authorities that the government of India may send a senior representative of the RAW to Moscow to obtain authenticated records of KGB payments to Mr Gandhi and his family, said the letter.
The Janata Party president also said that he had information that during the second half of 2001, Mr Gandhi was detained at Boston’s Logan Airport by US law enforcement authorities for possessing $160,000 in cash. However, Dr Swamy says, “The then principal secretary to the PM, Brijesh Mishra, to my knowledge, had intervened with the US Secretary of State, and arrangements were made get to Mr Gandhi released.”
“In his deposition to the US authorities before returning to London Mr Gandhi had declared that the money was his, and he had drawn it out of his secret account in Pictet Bank, headquartered in Zurich, Switzerland. I may mention here later that while studying in Rollins College, Winter Park, Florida, USA, Mr Gandhi paid his tuition and other fees to the College from his secret accounts,” Dr Swamy alleged.