The State-owned Air India has been provided Rs 4,928 core in Budget 2012-13, a major part of the Rs 6,831 crore which has been allocated to sector in the Budget.

For the airline sector as a whole, the Budget has also proposed a number of steps. To meet the immediate financing concerns of the sector, the Finance Minister, Mr Pranab Mukherjee has proposed tapping the External Commercial Borrowing route to meet the working capital requirements of the industry. The industry can use the ECB route for one year and cumulatively seek up to $1 billion.

In addition to providing low-cost funds to the sector, the Minister has reduced the rate of withholding tax on interest payment of ECBs to 5 per cent from 20 per cent earlier for three years.

Pointing out that the country has the potential to establish itself as a hub for third-party Maintenance, Repair and Overhaul (MRO) of civilian aircraft, Mr Mukherjee has proposed complete exemption from basic customs duty parts of aircraft and testing equipment imported for the facility. In addition, the Minister has also proposed to fully exempt both new and retreaded aircraft tyres from basic customs duty and excise duty.

The Finance Minister also announced that a proposal to allow foreign airlines to acquire up to 49 per cent equity in scheduled and non scheduled airlines is under the “active consideration” of the Government.

(This article was published on March 16, 2012)
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