India’s Finance Minister Nirmala Sitharaman unveiled the 2022 Union Budget on 1st February. The sale and restructuring of Air India seemed to be the main emphasis in this year’s budget allocation.
The Aviation Industry, hardly hit by Covid was expecting some relief from the Union Budget 2022-23. However, overall, the budget did not seem to meet their expectations and left the Aviation Industry disappointed.
Expectations by the Aviation Industry from the Union Budget 2022
It is essential to understand that the Aviation Industry was one of the most hardly hit industries due to Covid19. It restricted vital operations and mobility according to Airline Executives. Therefore, the Aviation Sector was expecting some good news from the Union Budget 2022 to provide relief. However, the government failed to do so and worse, it overlooked some of the key issues as per airline executives.
The Aviation Sector expected to receive monetary compensation and concessions on goods and service tax (GST) (for purchase and re-imports of aircraft and their components) for a speedy recovery from loss incurred by Covid19.
Moreover, the Aviation Industry was hoping to reduce working capital interest rates provided to airlines and airport operators.
Most importantly, the industry expected a reduction in excise tax on aviation turbine fuel (ATF) — it accounts for the majority of the airline operational costs. However the Budget did not meet their demand and well, to make things worse, just ahead of the Union Budget, the Indian Government decided to hike the price on ATF to up to 8.5%. The cost of ATF has gone up to ₹86,038.16 (approx. $1,150) per kiloliter (kl) in the national capital region — the highest price ever recorded.
Many Airline Executives expressed their concerns about how the Union Budget 2022 failed to meet their expectations.
“…we were expecting tax concession to Aviation industry in the forms of cut in ATF excise duty and allocation of concessional finance to airlines to help us come out of the pandemic.“
IndiGo’s CEO, Ronojoy Dutta
“India’s Union #Budget2022 had nothing for aviation or tourism. This was highly disappointing & insensitive given the near-broken state of these sectors, although somewhat expected. Industry will be pinning its hopes – as in the past – on post-Budget redressal.”
Consultancy firm Centre for Asia Pacific Aviation (CAPA)
The Union Budget 2022 Allocation for the Aviation Industry
In total, the Indian Aviation Sector was allocated ₹10,667 crores (approx. $1.42 billion). Out of which, the regional connectivity scheme, UDAN received 600.7 crores (approx. $80 million).
₹9,259 crores ($1.2 billion) have been earmarked for AI Asset Holdings Limited to manage the loans and debts transferred to a special purpose vehicle (SPV) due to the financial restructuring of Air India.
An amount of ₹165 crores (approx. $22 million) has been put aside to go towards the medical benefits for retired Air India employees.
Last year, the government had allocated ₹3,224 crores (approx. $431 million) for the Indian Aviation Ministry. However, the expenditure substantially increased mainly due to Air India divestment. Additionally, the regional connectivity scheme, UDAN had received ₹600 crores ($80 million) in 2021. However, the expenditure for the scheme ended up going to ₹ 994 crores (approx. $132 million). Overall, the expenditure in 2021 pushed to ₹72,652 crores (approx. $9.7 billion).
The Union Budget 2022 and Drones
Keeping farmers in mind, the Indian Finance Minister Nirmala Sitharaman announced how the implementation of ‘Kisan Drones” will help farmers.
These drones will assess crops, digitise land records as well as spray insecticides and nutrients.
Furthermore, courses for skilling will also be started in selected ITIs across all states.
” Startups will be promoted to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS)”
Finance Minister, Nirmala Sitharaman
However, many experts seemed to be sceptical about the plan and questioned if drones are really useful for the farmers.
“Will it increase the farmers’ income? That’s the question nobody wants to answer,”
Agriculture and Food Policy Analyst, Devinder Sharma,
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