Faced with sharp drop in revenue due to pandemic-induced crisis in the aviation sector, private airport operators have renewed their demand for doubling the liquor sale limit to four litres at duty-free shops.
Raising the cap for liquor and increasing the baggage allowance to Rs 1 lakh from duty-free shops are among a dozen Budget recommendations by private airport grouping.
Delhi-based Association of Private Airport Operators (APAO) has also sought several concessions related to goods and services tax (GST).
Arguing for higher baggage and liquor allowance, the industry body has said that the move will result in more foreign exchange earnings, higher revenue share for state-owned Airports Authority of India (AAI) and a boost to the overall economy.
“With overall increase in tourism the customers are also experiencing new shopping experience at duty free shops at Indian airports. Customers are now seeking exclusive and premium items which they are unable to buy due to lower limit of allowances,” APAO is learnt to have stated in its recommendations for Budget 2021-22.
Finance Minister Nirmala Sitharaman has begun stakeholder consultation for the upcoming Union budget. The industry representatives have been asked to send their suggestions for supporting manufacturing and services sectors.
“The present limit of Rs 50,000 has remained stagnant since April 2016 and with overall increase in inflation the effective allowance has gone down,” the APAO has noted.
It further claimed that liquor allowance given in India is not at a par with liquor allowance in neighbouring countries. Notably, sizable business at duty free operation in South East Asia and Middle East region is through tourists that originate from India. Indian passengers purchase duty free goods outside India depriving opportunity to India’s duty-free business.
Sales from duty-free shops account for about 15-20% of the total non-aero revenues earned by the major airports.
Cigarettes and liquor together account for the bulk (75-80%) of the duty-free shops. Non-aero revenues account for sizeable part of private airport operators’ revenue and a portion of it goes towards subsidising operational costs.
While private airport operators managing the country’s major airports such as Delhi, Mumbai, Hyderabad and Bangalore have been making a case for raising the duty-free baggage allowance, the government has not paid much heed to it so far. Instead, there have been discussions around bringing down the upper cap.
Amid unconfirmed reports earlier this year that Commerce Ministry may recommend lowering liquor allowance from 2 litres to 1 litre and to do away with import of cigarettes presently one carton of 100 sticks, APAO had vehemently opposed any such move.
It had estimated that any such move would result in all the airports together losing Rs 650 crore annually. Also, this will mean an increase in aeronautical charges of around Rs 200 crore eventually leading to higher ticket prices for passengers.
In a big sigh of relief for the airport firms, the government has continued the earlier rules and not tinkered with the upper limit at duty-free shops.
Among GST related recommendations, the airport lobby group has said that sooner the ATF (aviation turbine fuel) is subsumed into the new indirect tax regime better it will be for the industry as it reduces the overall air travel cost with the benefit of Input Credit of Tax on jetfuel.
The APAO has also sought clarification on availment of credits pertaining to events organized for concessionaires and airport customers on occasions like Karnataka Rajyotsava, Independence Day and Dussehra.
“It is our humble request that credits for such events ought to be made available to the airports as the said expenses are borne by the airport as a directive from the Government in course of its operations and not for the welfare of employees of the company,” the industry body has pitched.
The Concession agreements signed between private airport operators and Ministry of Civil Aviation (MOCA)/AAI mandate the conduct of events by the airport for customers during specific occasions such as Karnataka Rajyotsava, Independence Day and Dussehra. The credits pertaining to such expenses are currently disputed by the tax authorities.