The government's announcements for civil aviation sector breathe some life into the coronavirus pandemic-hit sector and will provide overall positive sentiment, experts said on Saturday, even as some of them emphasised the need for support for airlines.
On Saturday, Finance Minister Nirmala Sitharaman announced plans for managing airspace efficiently, making the country a MRO (Maintenance Repair and Overhaul) hub, and auctioning of six more airports on PPP model.
GMR Group Chairman GM Rao said India is leading the growth of civil aviation sector globally and is generating significant economic impact.
According to him, rationalising Indian airspace is a significant step that would benefit not only the entire sector but also bring down travel time for passengers.
Privatising six new airports under public-private partnership (PPP) model would generate significant economic effect and would lead to creation of new jobs.
"Likewise, tax incentives for the MRO sector will not only bring foreign investment into India and impact the economics of the airlines but will also open up new opportunities for youth to build careers. The investments being made in airports, privatised in the first two phases, are already leading to enhanced job creation in both aero and non-aero areas," he said.
GMR Group manages two airports- Delhi and Hyderabad - through PPP model.
Welcoming the announcements, GVK Group founder and Chairman G V K Reddy said the move to have PPP model for six more airports would provide the Airports Authority of India (AAI) resources to develop smaller airports across the country.
"The plans to make India a global MRO hub will ensure savings of precious foreign exchange and enable Indian airlines to get their aircraft serviced locally," he said.
GVK Group manages Mumbai airport through PPP model.
Consultancy EY India's Transaction Partner Kuljit Singh said the announcements are good initial first steps and this might be followed by a second phase of reforms package.
"... the second phase may need to have more reforms in taxes on fuel, subvention for airport charges, government guarantees for additional unsecured borrowings of private airlines etc," he noted.
Law firm Cyril Amarchand Mangaldas' Partner Ajay Sawhney said that today's announcement breathe some life into the pandemic-hit civil aviation sector, but no mention of bailouts on an immediate basis may attract mixed response from the industry.
"Though, easing curbs on airspace would certainly bring in long term efficiency, and on an immediate basis some relief to the airlines, but a more meaningful intervention may be required if the aviation sector is not on the recovery path soon," he noted.
Travel portal EaseMyTrip.com Chairman and CEO Nishant Pitti said the announcements would definitely provide positive sentiments for the industry overall.
"In addition for industry to withstand the recovery period, government will need to support the backbone, airlines, in these turbulent times through tax relief or relaxation in multiple charges paid by airlines to reduce their costs," Pitti said.
Vasudevan S, Partner (Infrastructure Government and Healthcare) at consultancy KPMG in India said the aviation sector is the hardest hit because of the global pandemic with an estimated USD 500 billion loss in airline and airport revenues in FY20.
Airport PPP transactions will help unlock value for AAI and state governments, given current investor interest and long-term potential of the Indian market.
"Rationalising the MRO tax structure has been a long pending demand of the industry and it is good to see that happening finally, but more needs to be done to create a level playing field, attract foreign investment and make it profitable," he noted.
Care Ratings Chief Economist Madan Sabnavis said aviation sector has incentives as six airports would have PPP model, but the "question is who will invest now when future of airlines is uncertain".
Consultancy Deloitte India Partner Peeyush Naidu said the initiative for private sector participation for operations, management and development of airports is well-intentioned.
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