Can govt's proposal to scrap import duty on private jets boost India's chartered aviation industry? MC Explains

Charter Planes

The central government is considering a proposal to scrap the import duty on business jets in India amid the aviation boom in the country.

The move to remove the 2.5 percent import tax on non-scheduled operators bringing commercial jets to the country comes at a time when the demand for private planes in India is growing at a rapid pace.

Various organisations are contemplating purchasing business jets to meet their commercial aviation demands, a senior executive from Club One Air, one of the largest jet air charters and non-schedule operators in India told Moneycontrol.

But will the removal of an import duty boost commercial jet sales in India? Or is more needed to be done for India for corporations to consider importing commercial planes? Moneycontrol tries to answer these questions.

Companies have started importing more corporate jets in India after the Covid-19 pandemic, but lack of policy clarity on the import of aircraft, poor infrastructure at Indian airports, high fuel costs, lack of proper aircraft maintenance, repair and operations in India and a shortage of trained pilots and staff still hinder the industry from blossoming in India, multiple industry experts said.

"Policy consistency is key for the private business jet industry to bloom in India. But just last year the government was looking to curb ‘non-essential imports’ of certain kinds of aircraft which left the industry in shock," a senior industry expert told Moneycontrol.

Similarly, a senior executive from private jet aggregator JetSetGo told Moneycontrol that the Directorate General of Civil Aviation's norms to import private jets into the country were very harsh compared to markets like Dubai, Singapore and even China.

"The entire process of importing a private aircraft to India is a time consuming, tedious and challenging one, even through the government's GIFT City, where companies are offered a tax holiday on the capital gains of aircraft leasing," the executive said.

Indian companies also find it difficult to operate a business jet in India while having the aircraft registered on a foreign aircraft register as the DGCA has been clamping down on corporates who were using this method since 2018, another industry expert told Moneycontrol.

While India has the world's fifth-largest commercial aircraft fleet in the world and is projected to become the third-largest aviation economy by 2030 in terms of passenger traffic and aircraft fleet, the country is still the 15th-largest commercial jet market in the world.

As per the latest data from the Directorate General of Civil Aviation, there were 381 aircraft and helicopters registered with 112 non-scheduled operators in India as of December 2023.

An aircraft with a non-scheduled operator’s permit can be used to ferry passengers on a per-seat basis, or the entire aircraft can be chartered on a per-flight basis. Non-scheduled flights do not have a fixed schedule as commercial airlines.

India lags behind countries like the Isle of Man and the United Kingdom in private aircraft mainly because importing corporate jets is expensive to bring into India and even more expensive when it comes to maintenance.

Kalanithi Maran’s Sun TV, the Adani Group and the owners of Serum Institute of India are some names that have invested in purchasing business jets since 2021.

According to Club One Air domestic air passenger traffic for business aircraft or private jets has risen around 1.5 times since 2021 as domestic air passenger traffic in India has boomed since the pandemic.

"Many customers who had earlier never dreamed of travelling in a private jet now prefer chartered flights over commercial business class flights," the executive from Club One Air said.

Similarly, the executive from JetSetGo highlighted that at least 30 percent of its customer base is made up of new customer base in the last two years.

The chartered plane industry has pointed out that to boost the industry further in India the government should look to reduce customs charges on arriving planes, cut the complexity of importing planes to India and help reduce fuel charges in the country.

"To give you a simple example, if you buy a plane and register it in San Marino or the UK or America, the plane starts flying within 25, 30 days of buying it. In India, that same procedure takes between 60 to 120 days, which is horrendous," an industry executive told Moneycontrol.

The chartered plane industry has also called on the government to come up with a different set of regulations for private jet firms. Currently, the regulations for commercial airlines and private jets are the same.

The chartered planes industry is confident that the removal of import duty will not only lift corporate purchases of business aircraft in India but also help boost the Tier-II and III connectivity in the country.

"New smaller airports that have been inaugurated across India are a massive opportunity for the chartered flight industry in the country and reducing import duty on planes will help the industry get more planes to meet the opportunity," the executive from Club One Air said.

Similarly, Santosh Sharma, founder of Bookmyjet, an online platform for booking business jets, said the removal of the import duty would encourage more wealthy individuals and corporate houses to consider private jets for professional as well as personal use.

“There are some clients who are sitting on the fence thinking whether or not to buy their own private jets," he said.