I joined as director in the ministry of civil aviation and tourism on February 17, 1992. That was the time when the monopoly of the two state carriers, Indian Airlines and Air India, was nearing its end, and a new era of private operators was about to begin. There was chaos and confusion all around. Amidst this, I received an unusual file: an urgent enquiry-cum-request from the Central Board of Excise and Customs (CBEC) to inform it about the accurate (at least approximate) valuation of a used UK-origin British Aerospace One-Eleven twin-turbofan short/medium-range transport aircraft, imported from Romania by a prospective non-resident Indian private airline promoter. I found it unusual as it’s the CBEC’s mandate to do the valuation of all imported (or exported) goods, and fix the rate of customs duty.
On going through the papers and after a gentle prod to the finance ministry, it transpired that despite being professionals, CBEC officials had no idea of how to evaluate passenger jet aircraft, perhaps as aircraft were not run-of-the-mill trading commodities or normal machinery or machine parts, described and prescribed in their operational manual for tax assessment. Aircraft valuation clearly lay beyond their standard operating procedure. Hence, when the Indian importer of a two-engine British Aerospace aircraft from Romania declared its value as Rs 1 crore, the CBEC officials were flummoxed; realising well that one cannot get a flightworthy twin-turbofan jet transport aircraft for this amount, however, old, archaic and dilapidated its condition may be.
Although I didn’t have any extra skill or special knowledge on the subject, the compulsion of the official position made me give it a try. Fortuitously, I came across a “fresh file” which showed that the Government of India had just concluded a deal to import four Boeing 747-400 (fitted with Pratt & Whitney turbo-jet engine) aircraft for Rs 2,223 crores, thereby making it Rs 555.75 crores per aircraft. I got a window to try through the deductive method. If a brand new (imported) four-turbofan jet transport had cost Rs 555.75 crores per unit, the price of a new (imported) twin-engine jet aircraft could never be less than Rs 220 crores!
There, however, emerged another tricky situation. Though of British origin, it came to light that vide a February 1987 announcement, the imported British aircraft was manufactured by Romania’s IAv Bucuresti, it being the prime contractor for licenced manufacture. Therefore, the price of the Romanian and British aircraft could not be the same, despite being similar in type. The price of aircraft in Western Europe is invariably higher than those produced in Eastern Europe. After due diligence, discussion and several rounds of debate and having considered the date, time, place and year of manufacture and a careful study of the flight log, maintenance manual and overhaul and repair record and flying hours logged, along with depreciation, etc, it was suggested that the imported aircraft could not be worth just Rs 1 crore. It was a case of gross under-valuation to avoid payment of customs duty. If my memory serves me right, the price subsequently arrived at by the customs department was more than Rs 40 crores.
23/02/18 Abhijit BHattacharya/Deccan Chronicle
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On going through the papers and after a gentle prod to the finance ministry, it transpired that despite being professionals, CBEC officials had no idea of how to evaluate passenger jet aircraft, perhaps as aircraft were not run-of-the-mill trading commodities or normal machinery or machine parts, described and prescribed in their operational manual for tax assessment. Aircraft valuation clearly lay beyond their standard operating procedure. Hence, when the Indian importer of a two-engine British Aerospace aircraft from Romania declared its value as Rs 1 crore, the CBEC officials were flummoxed; realising well that one cannot get a flightworthy twin-turbofan jet transport aircraft for this amount, however, old, archaic and dilapidated its condition may be.
Although I didn’t have any extra skill or special knowledge on the subject, the compulsion of the official position made me give it a try. Fortuitously, I came across a “fresh file” which showed that the Government of India had just concluded a deal to import four Boeing 747-400 (fitted with Pratt & Whitney turbo-jet engine) aircraft for Rs 2,223 crores, thereby making it Rs 555.75 crores per aircraft. I got a window to try through the deductive method. If a brand new (imported) four-turbofan jet transport had cost Rs 555.75 crores per unit, the price of a new (imported) twin-engine jet aircraft could never be less than Rs 220 crores!
There, however, emerged another tricky situation. Though of British origin, it came to light that vide a February 1987 announcement, the imported British aircraft was manufactured by Romania’s IAv Bucuresti, it being the prime contractor for licenced manufacture. Therefore, the price of the Romanian and British aircraft could not be the same, despite being similar in type. The price of aircraft in Western Europe is invariably higher than those produced in Eastern Europe. After due diligence, discussion and several rounds of debate and having considered the date, time, place and year of manufacture and a careful study of the flight log, maintenance manual and overhaul and repair record and flying hours logged, along with depreciation, etc, it was suggested that the imported aircraft could not be worth just Rs 1 crore. It was a case of gross under-valuation to avoid payment of customs duty. If my memory serves me right, the price subsequently arrived at by the customs department was more than Rs 40 crores.
23/02/18 Abhijit BHattacharya/Deccan Chronicle
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