Even after six years of liberalisation, the Indian aviation sector is groping for direction.

There is no consistent policy and the Civil Aviation Ministry has amended wet-leasing guidelines less than a month after banning the practice. The Foreign Investment Promotion Board has again deferred its decision on the Rs14 billion ($329 million) Tata Airlines proposal, even though it is very much in line with the new aviation policy guidelines which allow 40 per cent equity participation from foreign companies other than airlines.

Tata has given written assurance to the aviation ministry that there would be no indirect equity participation or control by foreign airlines in the proposed airline, nor any management contract with foreign airlines. One aviation expert says the government's deferral does nothing but show disregard for its own aviation policy.

Meanwhile the civil aviation ministry has amended month-old wet-leasing guidelines. The ministry now says the wet-leasing will have to be granted by the government against an application by the company.

In yet another classic case of contradictions, the Civil Aviation Ministry grants duty exemptions to foreign airlines while the Petroleum Ministry levies the same duties on those same airlines.

The Petroleum Ministry levies demands a sales tax of around 5 per cent on aviation turbine fuel sold to foreign airlines serving Indian destinations despite the exemptions. Indian oil companies say 36 foreign airlines including Cathay Pacific, Lufthansa, Air France and United Airlines owe as much as Rs22.5 billion. Foreign airlines say the bilateral air service agreements clearly state they are exempt from local taxes.

Source: Airline Business