Consultancy firm KPMG today asked the new government to initiate reforms in the aviation sector by privatising Air India, getting states to develop no-frills airports, slashing sales tax rates on jet fuel and giving a tax holiday on aircraft maintenance facilities.

Listing out top priorities for the new government, KPMG’s India head of aerospace and defence Amber Dubey also suggested establishment of an inter-ministerial group on aviation to facilitate faster decision-making across ministries like home, defence, finance, tourism and environment on issues relating to the aviation sector.

Besides privatising Air India, the new government should also undertake a complete overhaul of aviation regulator DGCA.

It should abolish the rule for allowing Indian carriers to fly abroad (five years of domestic flying and a 20-aircraft fleet) and conduct a debate on the need for an open sky policy within the country, Dubey said.

The new dispensation should work closely with major states to reduce sales tax on aviation turbine fuel to zero or four per cent, with the eastern states have already shown the path, he said.

Recommending declaration of a decade-long tax holiday on Maintenance, Repair and Overhaul (MRO) facilities, he said creation of jobs, saving of foreign exchange and increase in direct tax collections from MROs and employees would be several multiples of the “notional loss“.

Most of these issues have been covered in a presentation worked out by the Civil Aviation Ministry on crucial issues facing the sector like review of the 5/20 rule to allow Indian carriers to launch global operations and the downgrade of India’s safety ranking by the US aviation regulator.

The presentation is likely to be made to the new Civil Aviation Minister and the government on Tuesday.

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