Wednesday, February 06, 2019

GIFT City can launch aircraft leasing

A working group tasked with planning a roadmap for developing aircraft leasing and financing industry in India has suggested that the country's sole international financial services centre of GIFT City in Gujarat should be used for launching this industry in the country. Globally, the aircraft leasing and financing businesses are operated from the international financial services centre (IFSC) and GIFT City provides the off-shore status for financial services to residents and non-residents under the current regulations by offering important income tax incentives, company law exemptions and dispute resolution mechanism, among other benefits.

Most importantly, the off-shore status of IFSC with the same ecosystem as other offshore locations but which is physically present on Indian soil, would be relevant and apply to transactions entered into with Indian entities by airlines across the world, the suggestions submitted to the government notes. However, some changes to the provisions have also been suggested by the working group after identifying, and where possible quantifying, the inefficiencies in the existing ecosystem in India, and notably in the IFSC, vis-à-vis the regulatory regimes of the leading global aircraft financing hubs such as in Dublin (Ireland), Singapore, and Hong Kong and Tianjin (China), the civil aviation ministry officials said.

According to analysts, though India is set to become the third-largest aviation market in the world by 2022, it practically has nil aircraft leasing/finance industry at present. This is despite the fact that Indian airlines have placed orders in excess of 1,000 aircraft, making it the third largest order book in the world behind the US and China. Further, around 30 years from now, India's commercial airline fleet is expected to cross 5,000 aircraft requiring massive aviation eco-system, including maintenance, crews, lessors, etc, which is prompting the government to think on those lines, the ministry sources reveal. Further, more than 70% of the aircraft acquisitions over the last decade have been on an operating lease basis and the trend is expected to continue.
06/02/19 Shahkar Abidi/DNA