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Indian Government Blocks Aircraft Leasing Plans  
User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Posted (10 years 5 months 2 weeks 16 hours ago) and read 5010 times:

The Indian government dealt a huge setback to both state-owned and private carriers in the country as it imposed huge taxes on the aviation sector.

The Union budget released by Finance Minister P. Chidambaram on Thursday included a new 10% service tax to be imposed on all airport services including catering and ground handling, as well as a whopping 48% tax on lease payments made for aircraft leased-in.

The airline most affected by these new regulations will be the startup low cost carrier Air Deccan who has just introduced leased Airbus A320s into their fleet. It also affects Indian Airlines and Air India's plans to acquire aircraft on lease as a stopgap measure until their fleet acquisition plans are approved by the Government.

47 replies: All unread, showing first 25:
 
User currently offlineTexdravid From United States of America, joined May 2004, 1365 posts, RR: 0
Reply 1, posted (10 years 5 months 2 weeks 16 hours ago) and read 4982 times:

The new Congress government looks like it didn't waste any time raising taxes. Market friendly, huh?

I am hardly suprised by this news. Hardly.



Tort reform now. Throw lawyers in jail later.
User currently offlineWindowSeat From United States of America, joined Sep 2003, 1312 posts, RR: 57
Reply 2, posted (10 years 5 months 2 weeks 16 hours ago) and read 4968 times:



Sean,

Whats this government upto? This is disastrous. I mean, now I am really beginning to wonder, if the government really wants anyone to succeed, including Air India.

cheers






I'm all in favour of keeping dangerous weapons out of the hands of fools. Let's start with keyboards.
User currently offlineMaharajah From United States of America, joined Jun 2004, 10 posts, RR: 0
Reply 3, posted (10 years 5 months 2 weeks 16 hours ago) and read 4945 times:

I think this is a major setback for growth of AI, IC. Another factor (apart from new a/cs purchase decision) has been introduced to restrict the growth.

Praful Patel said that he will request FM to reconsider the decision. Hope this works (I doubt though Sad)



User currently offlineAirbusfanYYZ From Canada, joined Oct 2002, 1436 posts, RR: 25
Reply 4, posted (10 years 5 months 2 weeks 14 hours ago) and read 4880 times:

*Sigh* The cycle begins anew.

Cheers,
Kaz



t.dot photography
User currently offlineJaysit From , joined Dec 1969, posts, RR:
Reply 5, posted (10 years 5 months 2 weeks 14 hours ago) and read 4871 times:

Does any other country impose the same taxation levels on aircraft leasing?

And where on earth did they come up with this number from?


User currently offlineIndianguy From , joined Dec 1969, posts, RR:
Reply 6, posted (10 years 5 months 2 weeks 14 hours ago) and read 4830 times:

Its a question of priorities. You cannot spend resources on the urban rich while the vast majority of Indians live in penury.

Unlike the previous govt, which had no programme and was better known for its rollbacks than actual policy changes, The UPA has a plan of action and its priorities cut out. First the Agricultural and Education sector, 2nd the urban elderly and then the middle class. Sector wise: Its agriculture first, Manufacturing second and service third.

Air Deccan should NOT be affected too badly. The current changes policy also INCREASE the level of FDI from 40% to 49%. the hot rumor in the local aviation scene is that Deccan is to get a foreign partner (some Singaporean firm).

9W is properly screwed though! Is it true that they are even leasing OUT their owned 737's from next schedule?

-Roy


User currently offlineB747-437B From , joined Dec 1969, posts, RR:
Reply 7, posted (10 years 5 months 2 weeks 13 hours ago) and read 4812 times:

hot rumor in the local aviation scene is that Deccan is to get a foreign partner

Old news Roy. We discussed their intention to sell a stake to a foreign partner about a month ago!  Big grin

http://www.airliners.net/discussions/general_aviation/read.main/1603966/


User currently offlineIndianguy From , joined Dec 1969, posts, RR:
Reply 8, posted (10 years 5 months 2 weeks 13 hours ago) and read 4800 times:

Another reason why Deccan shouldnt worry is that I expect the govt i smoving towards working out a separate package for LCC's and expect to see a whole lot of sops for that particular section. While the excise duty on Lease charges may stay, you could expect concessions like discounts and even exemptions(for some cities) in landing and parking charges and stuff like that. Duties and Taxes on Leasing and Maintainance charges (if done abroad) could be slashed or done away with altogether for Turbo-prop aircraft.

Lets wait a while before announcing our judgement shall we? We tolerated every flip-flop of the previous NDA govt without a murmur and just 2 months into the new govt we are already rushing to pronounce our judgement?

-Roy


User currently offlineJaysit From , joined Dec 1969, posts, RR:
Reply 9, posted (10 years 5 months 2 weeks 10 hours ago) and read 4735 times:

"You cannot spend resources on the urban rich while the vast majority of Indians live in penury."

And how is this a factor in the Indian aviation industry? Better still, why should it be a factor? How will a regressive aviation lease tax affect the lives of millions of indians rotting away in Bihar or Madhya Pradesh?


User currently offlineIndianguy From , joined Dec 1969, posts, RR:
Reply 10, posted (10 years 5 months 2 weeks 6 hours ago) and read 4648 times:


Old news Roy.

Whats new is the potential investor has been clearly identified!

wrt to the taxes Its an attempt to explore new sources of revenue so as to bridge the deficit without compromising on the expenditure on crucial areas. Since beyond a point high tax rates may prove to be counter-productive and result in handicapping a sector (as in this case), the Govt needs to identify the right balance. That certainly needs to be done.

Tax policies are also a legit way to influence investments in a certain direction. So the govt *could* impose the duties on premium full service carriers like 9W and IC, while LCCs like Deccan and Alliance could be exempted. This allows for direction of investment.

-Roy


User currently offlineJaysit From , joined Dec 1969, posts, RR:
Reply 11, posted (10 years 5 months 2 weeks 2 hours ago) and read 4553 times:

"the Govt needs to identify the right balance."

Yes. More Govt. babu interference.
Trust the govt implicitly to make all those "wrong" decisions.
After all, the Indian aviation sector really grew by leaps and bounds under tight fisted babu control.


User currently offlineMaverickM11 From United States of America, joined Apr 2000, 17822 posts, RR: 46
Reply 12, posted (10 years 5 months 2 weeks 1 hour ago) and read 4531 times:

"Its a question of priorities"

Yes, like stuffing the pockets of the government and ensuring that nothing ever gets accomplished in India and the people never benefit. Protectionism has never worked and this is a prime example of how to kill your own industry. Congratulations India, you're par for the course.



E pur si muove -Galileo
User currently offlineJaysit From , joined Dec 1969, posts, RR:
Reply 13, posted (10 years 5 months 2 weeks 1 hour ago) and read 4516 times:

It makes no sense.

You establish a tax of 48% on leases of aircraft and at the same time raise the level of investment by foreign investors from 40 to 49%.

According to Mr. Chidambaram, that will attract foreign investors. Now which foreign investor with half a brain will pick up that leasing tab?

Its like restoring a man's eyesight, but then giving him a frontal lobotomy at the same time.



User currently offlineKaitak From Ireland, joined Aug 1999, 12593 posts, RR: 34
Reply 14, posted (10 years 5 months 1 week 6 days 21 hours ago) and read 4433 times:

I hate to say I'm not surprised, so I won't. You have to wonder whether there's a cadre of fifth columnists in the Indian civil service who are working to make a complete balls of India's civil aviation. The new government has not started well.

Yes, of course there is poverty (and quite a bit of penury, too) in India. So, how do you attack this? The old way, of artificially redistributing wealth and reverting to old ideological ideas of state control . . . or by identifying those parts of the economy which can contribute most effectively to economic growth. Aviation is, if it's allowed to be, such a catalyst . . . but its effect isn't being noticed in India because it's not allowed to contribute to its full effect. How long is this nonsense allowed to go on for? Just when will Indian Airlines and Air India be allowed to re-equip? I used to joke that I hoped the A340/777 would still be in production by the time the order was placed. I'm beginning to wonder if this really is a joking matter . . .


User currently offlineDl021 From United States of America, joined May 2004, 11447 posts, RR: 75
Reply 15, posted (10 years 5 months 1 week 6 days 20 hours ago) and read 4409 times:

Speaking as a non-Indian/Asian I often wonder how it justified in the bureaucracy there to allow important progress to be held up by the vast quantities of red tape...I just caught myself here...Is the problem that holds up everything from buying desperately needed trainer aircraft to new fleets for the civil airlines the bureaucracy itself. Are the middle managers justifying their jobs here or are their hands out? How many projects have been delayed because of this and how has that cost civil aviation in India?

I can see that the new government is reverting to the monolith socialist model, what happened to civil aviation in the past when this was the norm?



Is my Pan Am ticket to the moon still good?
User currently offlineBarfBag From India, joined Mar 2001, 2252 posts, RR: 6
Reply 16, posted (10 years 5 months 1 week 5 days 9 hours ago) and read 4205 times:

Taxing "the urban rich" because "millions live in penury" is an explanation right out of Marx's odious tomes. It is the "urban rich" (funny, when the rapidly growing domestic aviation sector sees so many aam junta middle class in the air) whose wealth creation, for better or worse, provides the government the revenue it spends on the social services it is obliged to. But hey, slamming those who make the money is central to every communist and socialist worth his little red book. I absolutely disagree with the logic.

While I completely agree with the general reasoning behind Chidambaram's push to broaden revenue collections by focussing on the service sector more (since that sector contributes >50% of GDP), I'm completely against any investment that is 'government directed'. We all know what a wonderful success a centrally driven economic system has been over the last 50 years.

The path of India's economic development is tied to how little the government is present in the decision makings of any sector, not how much it is. The government's influence in any given industry is a precursor to its throttling that industry as a means of disbursing patronage. Completely ignoring any specific political orientation, India has a massive problem with government interference at every possible level. The interface between the people and the government is stuck in a colonial time warp of an all-powerful sarkar whose whims people are beholden to in a mai-baap relationship, rather than people being the bosses and the government an unobtrusive provider of basic social services and driving policy to faciliate the people's economic and social efforts.

Call me a libertarian if you like, but that's how I see it. Every government until now, despite their accounts of their success, has been a massive failure as a provider of basic economic and social services by any international yardstick. It has nothing to do with the political hue of the government and everything to do with the fact that the government is entangled in something they have no bloody business being in. Instead we have "questions of priorities", "selective investment in aviation", "no privatization of profitable PSUs (public sector undertakings, i.e. government run entities like AI)", "PSUs have a social obligation", the nincompoops of the AAI and their CPI/CPM patrons wailing about efforts to improve airports because it cuts off their own fingers from the till  Insane



India, cricket junior and senior world champions
User currently offlineBa319-131 From United Kingdom, joined Jan 2001, 8588 posts, RR: 54
Reply 17, posted (10 years 5 months 1 week 5 days 8 hours ago) and read 4184 times:
Support Airliners.net - become a First Class Member!

Totally mad,however it does not surprise me,sadly Sad


111,732,3,4,5,7,8,BBJ,741,742,743,744,752,762,763,764,772,77L,773,77W,L15,D10,30,40,AB3,AB6,A312.313,319,320,321,332,333
User currently offlineVimanav From India, joined Jul 2003, 1524 posts, RR: 14
Reply 18, posted (10 years 5 months 1 week 5 days 8 hours ago) and read 4172 times:

6 months... 180 days.. is all I give this Government, before they self destruct. Mind you, we have the right guys as PM and Fin. Minister, but those miserable Commies they have allied themselves with will bring them down.

Truly sad Sad



Sarfaroshi kii tamannaa ab hamaare dil mein hai, Dekhnaa hai zor kitnaa baazu-e-qaatil mein hai
User currently offlineRussophile From , joined Dec 1969, posts, RR:
Reply 19, posted (10 years 5 months 1 week 5 days 8 hours ago) and read 4170 times:

Does any other country impose the same taxation levels on aircraft leasing?

Yes, Russia imposes 40% on all foreign aircraft importation. And it's something that I support 110%!

India is a different case though.

Also, you will find that most countries will have some degree of taxation of aircraft imports.


User currently offlineIndianguy From , joined Dec 1969, posts, RR:
Reply 20, posted (10 years 5 months 1 week 5 days 7 hours ago) and read 4155 times:


I'm completely against any investment that is 'government directed'.

The path of India's economic development is tied to how little the government is present in the decision makings of any sector, not how much it is.


Well boo diddly hoo barfbag! The Govt is going to play a role in policy making and a positive one this time as compared to what happened the past 6 years! That is its role. Giving direction to the market IS the job of the govt. The govt in your favorite country does so too. How would u justify the billions of dollars paid out as subsidy to favoured carriers after 9/11? So much for a so-called free market!!

India is not "your favorite country". Not yet. And till then, the govt must continue to play an active role in developing the aviation sector and providing overall direction. I am not an advocate of state owning airlines, but providing directions in thru policy initiatives is perfectly legit. There are parts of this country that need airlinks for development. There are over 360 developed airfields in the country which are unused and need to be further developed as commercial nodes. More so because of the lack of other infrastructre like roads. Our study (restricted to Maharashtra) showed that developing a good semi-subsidised air system may actually be cheaper than revamping the network of state highways. Hence the need to influence the flow of investment, state and pvt, towards aviation in smaller centers like Kolhapur and Nasik.

-Roy


User currently offlineBarfBag From India, joined Mar 2001, 2252 posts, RR: 6
Reply 21, posted (10 years 5 months 1 week 5 days 6 hours ago) and read 4135 times:

India is not "your favorite country". Not yet.

Ooh... the tired "ignorant unpatriotic NRI don't know nuthin' compared to proud deshbakht me" argument again. And who the hell are you to tell me which country I should favour ? I'll completely ignore your bizarre nonsequitur about the 9/11 bailout, because I have no idea what sort of a point you're trying to make, particularly when you have no idea what MY opinion on that subject happens to be.

No matter how you argue "policy making by Government", it becomes Government intervention in the course of time. Sticking to the aviation sector in India alone provides everything I need to argue this case. Lets start with just policy, not even presence in the sectors through AI/IA. Aviation has for decades been seen as the 'playground of the rich', toys for those hated bourgeoisie, who must therefore be taxed up their wazoo through fuel surcharges, IATTs and whatnot.

This simple example demonstrates the effect of government 'policy' on the ability of the aviation sector to develop. I don't even need to go into the government presence in the sector to demonstrate why the mere tinge of economic ideology on policy is enough to hurt the aviation sector. Rather than let it by driven largely by market forces, the sector is throttled by ideology and some minister's desire to utilize it as his personal favour-granting fiefdom. I'm all for government policy that unilaterally removes their ability to play a controlling role in any given sector, not one that constrains it. I believe government driven policy that 'influences investment' in aviation is inherently unsound because:
a) investmnt ought to be determined by market forces
b) the economic ideology of the government is implicitly tied to such a move.
Our PSUs, those gigantic, inefficient, money sucking white elephants, are examples, in the thousands, of where 'government influenced investment' has led things to. The market is the best arbiter on investment, period. Its been proved everywhere, not just the US or India.

There are several aspects of India's taxation regime that need revision. Taxation of the service sector is among them. Its not a simple matter of the sector being taxed too little/much, but that the entire regime is outdated; taxation must be a system of collecting user service charges in a capiltalist economic system, not some overarching system tied to socialist ideology from four decades ago. I welcome some changes, e.g. the taxation on NRE deposits (which were practically a subsidy to NRIs), as much as I'm deeply critical of others, like the ones in the aviation sector that are the subject of this thread.



India, cricket junior and senior world champions
User currently offlineDl021 From United States of America, joined May 2004, 11447 posts, RR: 75
Reply 22, posted (10 years 5 months 1 week 5 days 1 hour ago) and read 4085 times:

I guess I got my answer.. I even got to hear Russyphile throw in a point about Sovi..i mean socialist style protectionism that stifles trade and growth. Are these 40% taxes helping Russian civil aviation grow? Will government meddling help the Indian civav sector grow....or will these impediments to growth stifle foreign investment (even more) and force people to lease airplanes registered in Bermuda and other get-around-the-man tactics to try and run employment and revenue generating businesses?


Is my Pan Am ticket to the moon still good?
User currently offlineJwenting From Netherlands, joined Apr 2001, 10213 posts, RR: 19
Reply 23, posted (10 years 5 months 1 week 5 days ago) and read 4073 times:

Don't you love socialism?

Air travel is for the rich bourgeois so needs to be curtailed.
Travel in general is bad, people should stay where they're put.



I wish I were flying
User currently offlineTKMCE From India, joined May 2002, 841 posts, RR: 2
Reply 24, posted (10 years 5 months 1 week 4 days 11 hours ago) and read 3985 times:

As Sean said in his first post, major setback will be to low cost Air Deccan as well as govt owned Indian Airlines.

Don't need to guess too much who benefits!

This is not the commies playing around but some vested capitalists and is nothing but an effort to block the entry of LCCs as well as conveniently blocking Indian Airlines who is struggling for capacity in the short term!

And as far as priorites are concerned, bringing air fares down will not just benefit the rich, it will also ensure a lot of people who otherwise can never even dream of flying will also be able to do so! India is a vast country and alternate infrastructure like roads are poor! Lower airfrares will also benefit a lot in terms of more productivity in terms of savings on unproductive manhours lost travelling huge distances in trains and buses!

An example - Chennai Hyderabad - the fastest train takes a whopping 13 hours as opposed to a flight duration of one hour!

Cheapest APEX or Air Deccan fare is Rs 2300. Train fares on II Sleeper is 300 and II tier AC 1300 .Now if the air fares are brought down to the 1000-1500 level everyone benefits!

I thought things will change for the better with this governement. But it seems they are still being armtwisted by the same old people who influenced the earilier government as well.

Disgusting!





25 Jaysit : "There are parts of this country that need airlinks for development. There are over 360 developed airfields in the country which are unused and need t
26 Post contains images Russophile : Dl021 I guess I got my answer.. I even got to hear Russyphile throw in a point about Sovi..i mean socialist style protectionism that stifles trade and
27 Jaysit : The comparison with the Russian policy of taxing non-Russian AC purchases and leases is odious at best. Russia has a viable indigenous aircraft indust
28 Post contains images Russophile : Precisely Jaysit, which is why I stated that India is a different story to the Russian example of duties. But copycat aircraft?
29 Donder10 : Ask any Australian farmer what they think when an American claims that they are a free market place. They will likely laugh in your face, right after
30 Indianguy : Ooh... the tired "ignorant unpatriotic NRI don't know nuthin' compared to proud deshbakht me" argument again. Tired? Hardly! Just stating the obvious
31 Jaysit : Il-96 ----> Vc10 Tu-204 ---> Boeing 757 etc. In any case, why should aircraft leases be taxed? If the airline industry is one that according to the ol
32 Post contains images Russophile : Il-96 ----> Vc10 Tu-204 ---> Boeing 757 etc. Jaysit, I didn't take you for one of those idiots who claim that everything to come out of the Soviet Uni
33 BarfBag : Roy - you're utterly incapable of comprehending or accepting that someone can have a position on politics that differs from yours, without your turnin
34 Jaysit : "But I will say, that your argument is shown to be weak when you can't even get the aircraft type right. It is Il-62, not Il-96 -- the Il-96 is the de
35 MD11Engineer : Jaysit, I´ve got to correct you about the TU-204. Two years ago I was running the CIA (Rome Ciampino) maintenance station for UPS for a month. I had
36 MD11Engineer : Jaysit, I´ve got to correct you about the TU-204. Two years ago I was running the CIA (Rome Ciampino) maintenance station for UPS for a month. I had
37 Jaysit : "The TU-204 is much more advanced than the 757." So, its a technologically advanced Boeing 757 . Good to hear ! Hopefully, I will be flying her on a M
38 Post contains images Vimanav : Hopefully, I will be flying her on a Moscow - Mumbai flight this fall ! Jaysit... you're likely to get her more advanced sister the TU214. Good Luck r
39 Jaysit : "Jaysit... you're likely to get her more advanced sister the TU214." That would be the SUPER advanced Boeing 757 !!! In any case, lets get back to the
40 Russophile : Sorry, it is the Il-62. That was a typo. But you know what I'm talking about. For me to know what you are talking about, I would have to recognise tha
41 Post contains images ACAfan : Its like restoring a man's eyesight, but then giving him a frontal lobotomy at the same time. Not quite. A frontal lobotomy will not affect the eyesi
42 Jaysit : "And I do not believe this is the case." Oh, who gives a @#$%. Get your Russian made coarse knickers out of a wad. Or is it the sandpaper Russian TP t
43 Jaysit : Interestingly enough, the Indian newspapers are reporting that AI and IC may have to sign agreements in locations where India has a double tax exempti
44 Russophile : Get your Russian made coarse knickers out of a wad. Or is it the sandpaper Russian TP thats causing the snitch? At least in Russia, they don't have to
45 MaverickM11 : "In short, the TU-204 is technologically somewhere between the B-757 and the A-320." I think the 757 still outperforms the TU-204 in many ways (range,
46 Jaysit : "And the Il-62 safe? Just as safe as the DC-10 -- remember, that's the jet that liked to go cartwheels down runways, and put on (unsuccessfully) aerob
47 Dl021 : OK..so the problem is not just political but graft (to get back to the topic) and people are using the new govt to create a haven for the legacy carri
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