A change in perception about business aviation is not only overdue, but also a necessity in the challenging times the Indian economy is passing through

Resplendent blue ribbons to celebrate the arrival of a business aircraft into the Indian skies are invariably preceded by strangulating red tape. At the beginning of this year, 40-odd applications for import of new aircraft into India were pending with the Ministry of Civil Aviation (MoCA). Going by past statistics, about a fourth of these would have been for business aircraft. The policy then was that the Minister himself approved the final import after the Aircraft Acquisition Committee (AAC) had carried out due diligence. Owing to delay in clearance by the AAC as also all along the line, the time taken from submission of application for import to the first touchdown on Indian soil was usually about nine months.

The cumbersome, bureaucratic and restrictive policies involve clearances from up to ten different agencies which include the MoCA, the Ministry of Home Affairs, Directorate General of Civil Aviation (DGCA) and the Airports Authority of India. One of the requirements is individual police verification and security clearance of all the directors of the parent company applying for the import. In short, the documentation and processing time is oppressive and discouraging. Much has been written about the sad state of bureaucratic and regulatory concertina wire that must be confronted and wiggled through for importing and operating a business aircraft in India.

Business Aircraft Operators’ Association

The Business Aircraft Operators’ Association (BAOA) formed two years ago through the amalgamation of Business Aviation Association of India (BAAI) and Indraprastha Aircraft Aviation Association (IAAA), has been rendering yeoman service to the business aviation sector. One of its significant drives has been towards convincing the establishment that a business aircraft is not just a status symbol but a substantial contributor to national economy. BAOA has indeed made some progress towards softening the official posture towards business aviation. However, there is no ray of hope as yet for what has been often referred to as the ‘stepchild’ of Indian civil aviation.

High Tax Burden

The main rationale for this sobriquet is the inordinately high duty imposed on the import of an aircraft into India for business purposes which the DGCA regards as “for private use”. The import duty on aircraft is three per cent and is applicable for all aircraft imported into India for non-scheduled or business purposes. However, business aircraft are penalised by an additional four per cent as special additional duty and 16 per cent as countervailing duty, thus bringing the total to 23 per cent, almost a fourth of the cost of the aircraft. This additional burden is imposed under Customs Tariff Act, 1975. Para 3A of Chapter 88 of the Act permits special additional duty to be collected at the rate of eight per cent unless a lower rate is prescribed by the government. The figure is horrifying from the point of view of the buyer. The distinction is not impermeable though as some business houses have sought and obtained non-scheduled operator permits and used them to import aircraft meant essentially for business purposes. However, the government remains doggedly and single-mindedly determined about not lowering the duty. Incidentally, this inordinately high rate of duty on business aircraft was introduced in 2007. It may be mentioned that the period from 2003 to 2006 witnessed growing interest in business aviation as part of the second wave of liberalisation of civil aviation in India. The imposition of this extortionate rate of duty has proved to be a major factor in the stunted growth of business aviation in India since 2007.

Infrastructure Issues

The travails for business aviation do not end with import. Documentation necessary to get the aircraft off the ground essentially a repeat of the certificates already held by that aircraft under another regime such as the Federal Aviation Administration (FFA) or European Aviation Safety Agency (EASA), could take a few weeks. Once operations commence, new tribulations await the operator. Infrastructure for civil aviation is woefully oblivious of business aviation needs. There are no general aviation airports such as La Guardia near New York, Stansted, Biggin Hill near London and Seletar in Singapore. There are no dedicated terminals with hangars and parking space for business aviation aircraft especially at the metros. Parking slots for business aircraft are restricted and come at a premium. In the absence of heliports, rotary-wing aircraft are compelled to operate alongside fixed-wing aircraft.

Fixed base operators (FBOs) are almost non-existent and business terminals rare. Where they do exist, the charges, usually ‘per use’ fees, are exorbitant and unreasonable. Busy metros are notoriously inhospitable to business aircraft; some of them would like to shoo away business aircraft as soon as they have brought in a passenger load, only to let them come back when the passengers are ready for a quick departure. Overnight stays are frowned upon, not easy to manage and come at a price. The BAOA has had to resort to legal action in order to alleviate the burden of penal charges levied by the Mumbai International Airport Limited (MIAL) on non-Mumbai-based business aircraft. An appeal is pending with the Airports Economic Regulatory Authority (AERA). The maintenance, repair and overhaul (MRO) support for business aircraft is also inadequate and expensive. One of the reasons is the small number of business aircraft and the other is the taxation regime which renders unattractive any MRO venture by original equipment manufacturers (OEMs) and aircraft manufacturers. Apart from sales tax/value-added tax, service tax and customs duty, MRO business ventures have to pay hefty royalty to the airports they are based at. Last year, the Airports Authority of India (AAI) decided to raise the royalty charged from MROs to bring them on par with those of ground handling services at airports. This has delivered another blow to the MRO business, discouraging new and potential entrants.

Need for Policy Changes

Significantly, even the International Air Transport Association (IATA) has been critical of the approach of the Indian Government towards aviation and has hinted at the need for a ‘national’ stance recognising the benefits of aviation to the nation. As the travails of civil aviation are affected by the policies of several Central Ministries in addition to state government policies, a comprehensive set of policies focused at giving business aviation its rightful dues and privileges, has not been possible so far. One of the reasons is that the tangible and intangible benefits of business aviation to national growth are not understood. There is the need for an erudite and informed study to elicit and present to the establishment the contribution that business aviation makes to the national economy. Oxford Economics, a key advisor to corporate, financial and government decision-makers, has carried out a study entitled ‘The Role of Business Aviation in European Economy’ last year and expounded on the usefulness of business aviation by way of being part of European transport network, a distinct sector, a complement of the scheduled network, a benefactor of local economies, a key corporate tool, a driver of employment growth, an investor in local infrastructure and a crucial contributor to European economic recovery. This kind of exercise has been done elsewhere in the world too. India is different from other parts of the world; a study addressing the Indian context could help in altering perceptions towards business aviation.

The business aviation community has been clamouring for a simplification of the import procedures, possibly into a single-window clearance system. The Minister announced recently that the process had been liberalised and that the AAC was being disbanded. While there was a general sigh of relief at the announcement, it is yet to be seen whether the time taken from the proffering of an application for import of an aircraft to the actual approval will get shortened. There is also perhaps a need for a dedicated desk both at the MoCA and the DGCA to look after the peculiar needs of business aviation specifically. According to Kapil Kaul, CEO, India and the Middle East, Centre for Asia Pacific Aviation (CAPA), “It is essential that a senior official in the MoCA be made the point guard for general and business aviation. The DGCA requires an organisational structure to oversee the interests of non-scheduled operators. The AAI and BAOA should also be involved in major decisions being taken on policy.”

Silver Lining

Business aviation is devoted to the needs of commerce and is predominantly used by business leaders, owners and executives for whom air mobility is essential to efficient functioning of their business ventures. Leisure travel by business aircraft is incidental to business travel and is a small proportion of the latter. A change in perception about business aviation is not only overdue, but also a necessity in the challenging times the Indian economy is passing through. The recent endeavours of the BAOA, so far rewarded by some accomplishments though modest, yet adequate for the non-airline civil aviation sectors to sit up and take notice, represent a silver lining in the otherwise bleak business aviation skies.