India’s airlines mired in US$20 billion debt

India’s airlines have piled up a debt load of US$20 billion and many global investors do not see reforms on foreign ownership, which might help the troubled industry, taking place anytime soon.


India’s airlines mired in US$20 billion debt


India’s airlines have piled up a debt load of US$20 billion and many global investors do not see reforms on foreign ownership, which might help the troubled industry, taking place anytime soon.

In the financial year that ended on 31 March, carriers lost more than $2 billion in part because of India’s high cost of jet fuel and exorbitant airport charges which are among the highest in the world. Aviation fuel prices – at least 50 per cent higher in India than Singapore and Sharjah, for instance, and differ from state to state within the country depending on local sales tax.

There is also the problem of a lack of political will to push through economic reform, while strangling red tape and a lumbering bureaucracy impede the industry. Despite growth in air passenger and cargo traffic, most airlines are cashstrapped and the country does not even have a national aviation policy. Foreign airlines are not allowed to invest in a domestic Indian airline but the government has been sitting for years on a proposal to allow them to take a maximum 49 per cent.

Airfares are about 300 per cent higher than those in China and some other countries because of high tax rates, says Jet Airways chief Naresh Goyal. “The aviation industry can’t grow with such taxation. In fact, India is the only country in the world to impose a service tax on airlines.”