A liquidity crunch among India's private operators has forced them into a showdown with the country's tax authorities, which are threatening to ground the fleet of any defaulter for the second year running.

At presstime, two carriers - Modiluft and feeder airline Jagson Airways - were still facing the threat of having their fleets impounded should they fail to repay the remainder of the sum owed for the Inland Air Travel Tax (IATT) collected in the period March to December 1995. All domestic airlines are required to collect the 15 per cent ticket tax and deposit it with the government within 30 days.

The customs authorities initially served notices on a further three carriers - NEPC Skyline, NEPC Airways and East West Airlines - for arrears totalling Rs81.2 million ($2.2 million) but these were repaid by the end of January deadline. Modiluft, with by far the largest single tax bill of Rs100 million, and Jagson, with debts of Rs2.9 million, both received an extension until the end of February after paying off Rs57.2 million and Rs1 million, respectively.

The carriers know not to treat the tax authorities' threat lightly. Last February, Indian customs grounded the aircraft of East West and Damania Airways (now NEPC Skyline) until the two carriers cleared outstanding IATT dues of Rs110 million. And customs commissioner R K Chakraborthi warns his department's patience is wearing thin with the recent defaulters. Analysts see the failure to meet tax demands as a further sign of the poor financial health of the home operators. 'Most face liquidity problems,' says one.

Ravi Prasad

Source: Airline Business