Given the slowdown in economic growth, decline in consumption and the tax revenue shortfall that was forecast for FY20, the aviation sector was not expecting any major spending provisions from the Union budget. Yet, stakeholders did feel that the budget may address structural challenges including taxation on maintenance repair and overhaul (MRO), further the government’s efforts on creating a leasing ecosystem and have announcements towards addressing the very weak liquidity situation for airlines. These were all overlooked.
With a total allocation of Rs 3,797 crore for aviation, much of this was the regular allocation. No new items were included. Steps announced in the last budget also did not find mention or continuity.
In the initial portion of the budget speech, it was highlighted that the government intends to spend Rs 1.7 lakh crore for transport infrastructure, which includes building 100 more airports till 2024. This was announced in the context of India’s fleet expected to double by 2024. But the funding mechanism for the airports remains unclear. These airports are likely to be regional airports – ones that have not quite seen a lot of investor interest. The budget documents revealed a revival of 50 existing airports in the upcoming financial year. However, the funding for this is via a budgetary allocation of
Rs 465.17 crore that comes from the regional connectivity scheme which interestingly is funded by a fee per departure on all domestic flights mostly flying core routes.
On air connectivity, the only announcement was that of the Krishi UDAN scheme. This in the context of farmers getting produce to markets and a focus on North Eastern states and tribal districts. It would seem that this is focused more towards cargo demand.
On privatisation and how this was accounted for in the budget, the government’s stance on Air India was very clear. A further Rs 2,205 crore was allocated for the Air India SPV, which has been instrumental in cleaning up the airline’s balance sheet.
Pawan Hans, in which two privatisation attempts have failed, was allotted Rs 9.45 crore. However, given that the Air India engineering arm (AIESTL); the regional airline arm (AASL); the Hotel Corporation of India (HCI); and the ground handling arm (AIATSL) are not part of the disinvestment, it was surprising to see no allocation made to these entities. A supplementary allocation may be how this might be addressed.
Other allocations were routine including funding for the Ministry of Civil Aviation, DGCA, BCAS, AERA and the commissioner of railway safety.
Budget 2020 as far as aviation is concerned failed to take off. Again.
Satyendra Pandey is the former head of strategy at a fast-growing airline. Previously, he was with the Centre for Aviation (CAPA) where he led the advisory and research teams. Satyendra has been involved in restructuring, scaling and turnarounds.
Read his columns here.
First Published: Feb 2, 2020 2:53 PM IST
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