The Hindu Business Line : Naresh Chandra panel for unbundling AAI

CALLING for "a bold and pragmatic approach" by all the authorities concerned to withstand competition in the civil aviation sector, the Naresh Chandra Committee has recommended complete unbundling of the Airports Authority of India (AAI) along with corporatisation of airport managements.

In its second report presented to the Minister for Civil Aviation, Mr Praful Patel, here on Tuesday, the Naresh Chandra panel has suggested that each of the larger airports should be managed by an independent corporate entity, while the smaller airports could be grouped together on a regional basis and corporatised.

State Governments and financial institutions, the report has suggested, should be encouraged to invest in the equity of these separate airport companies.

Besides, a part of the profits earned by the larger airports should go into a common airport management fund under the unbundled AAI and the revenue shortfall of the smaller airports should be met out of the common kitty, the report said.

However, airport companies that require such financial assistance, the report has noted, would have to present details of their plans to raise revenue and also provide the justification for seeking financial relief from the common kitty.

The Committee also noted that AAI has made very little effort so far to increase non-aeronautical revenues from the vast tracts of prime land owned by its airports.

Dwelling on the unbundling of AAI, the report has recommended that the consultancy, architectural and construction wings of the Authority should be hived off as a separate company, which may take an Indian company with good international track record as a joint venture partner.

To shore up funds, the Committee has suggested that financial institutions should be encouraged to invest in the equity of this separate joint venture company. "This entity should be encouraged to take up construction projects in India and abroad through the competitive bidding route," the report said.

For tiding over the problem of low air seat capacity to and from India, the Committee has urged the Government to expedite the liberalisation of air transport services, beginning with allowing domestic airlines to utilise the unused entitlements in the present air services agreements, especially with regard to all destinations with high traffic. However, members of the Committee refused to specify which countries would be included in the destinations with high traffic.

Wants tax sops on aircraft lease to continue

THE Naresh Chandra Committee has noted with "concern" the Government decision to withdraw the exemption from tax on remittances of lease rental of aircraft from April next year.

The Committee feels that this measure would act as a disincentive for plans to set up regional airlines to connect small towns.

"Air connectivity to small towns, especially those of `touristic' importance, shall be a major thrust areas in the coming years. Typically, these regional airlines would be small operators using small aircraft taken on lease. The Committee, therefore, recommends that the exemption from tax should not be discontinued," the report states.

Speaking to the media after the report was made public, the Minister for Civil Aviation, Mr Praful Patel, said: "Our recommendation is that it (the tax on remittance of lease rental of aircraft) should not be introduced".

The Finance Minister, Mr P. Chidambaram, while presenting the Budget for 2004-05 had said that any payment made by an Indian company to acquire an aircraft or an aircraft engine on lease from a foreign state or a foreign enterprise will not be exempt from tax from September 1 this year.

However, the Budget proposal has been put in abeyance and is now set to come into effect from April next year.