Plea to government to maintain status quo in duty-free liquor, tobacco allowance

V Rishi Kumar Hyderabad | Updated on January 23, 2020

Proposal to increase curbs will hit airport revenues, says ACI Asia-Pacific

Airports Council International (ACI) Asia-Pacific has called on the Union Commerce Ministry to retain the existing per passenger cap — of two litres of liquor and one carton of cigarettes — at duty-free shops in airports.

The ministry’s recent proposal to set new curbs is inconsistent with the government’s fruitful efforts till date to incentivise private capital in the public sector, and will damage the growth trajectory of Indian airports and duty-free retailers, according to an ACI statement.

Non-aeronautical revenues

The Commerce Ministry recently suggested a restriction on the purchase of tax-free alcohol at airport duty-free shops to one 1-litre bottle per passenger. It also called for stopping duty-free sales of tobacco products at these shops. “We urge the authorities to reject this proposal. Not only is it inconsistent with the latest attempts by the government to incentivise private capital to invest in the airport industry but it also undermines the growth opportunity for Indian airports and duty-free providers, who are a driving force in the local airport economy,” said Stefano Baronci, Director General, ACI Asia-Pacific.

“Duty-free operators must be able to count on the expansion of airport infrastructure along with new retail space and a regulatory framework that incentivises the market to grow. Unfortunately, the ministry’s proposal will limit this objective if airports cannot generate non-aeronautical revenues to cover aeronautical cost.”

Capital expenditure risk

The latest airport privatisation processes carry significant capital expenditure risk on the part of investors, requiring them to diversify and increase non-aeronautical revenue streams. The latest privatisation bids were set on the grounds that investors could enjoy full freedom to generate commercial revenues at the airport, ACI Asia-Pacific said.

The ministry’s proposal to reduce the sale of duty-free goods runs the risk of having the opposite effect because it neglects the potential adverse impact it may have on the growth of commercial business, it added.

Indian airports have tremendous growth potential in terms of duty-free and travel retail. Wine and spirits are the top duty-free segment in India, according to data.

According to the 2018 World Air Traffic Report published by ACI, passenger traffic in India will grow 6.1 per cent a year until 2040. Without the introduction of new curbs, it is forecast, spending in duty-free and travel retail will grow 20 per cent to $2.1 billion in 2022.

ACI Asia-Pacific is based in Hong Kong and represents 113 members operating 602 airports across 49 countries/territories in the Asia-Pacific and the Middle-East.

Published on January 23, 2020

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