EBG Position Paper - Aviation and Logistics

POSITION PAPER 2016
Aviation
Logistics

Disclaimer
This Position Paper is a collective expression of the views of the members of the EBG Federation
and its knowledge partners on key aspects of the business environment in India that affect the
development of India-EU business relationships.
The views expressed in each chapter are generally in conformity with the views of EBG Federation.
Information in this Position Paper is therefore intended for general guidance only. The views and
recommendations put forward in this Position Paper are proposed only to stimulate discussions
and offer suggestions to make Indian business environment more competitive. Whilst efforts have
been made to ensure that the information contained in this Position Paper is accurate to the best
of our knowledge, EBG Federation and its Knowledge Partners namely BMR Advisors, Ernst &
Young, Grant Thornton, KPMG and PwC does not assume any liability or responsibility for the
outcome of any decision taken by any reader on the basis of this position paper.
This Position Paper is intended for and is strictly for the use of members of EBG Federation and
other interested parties. Its contents shall not be reproduced in whole or in part without the prior
consent of EBG Federation.
The exchange rates for the purpose of conversion are based on the exchange rates prevalent in
the period of March-April 2016.

An introduction to
EBG FEDERATION IN INDIA
EBG Federation was established on 11th March, 2015 as a Section 8 company under the
Companies Act 2013 in order to ensure long term stability and broaden its sphere of activities
offering support and advocacy for European businesses in India. Founded as the European
Business Group (EBG), in 1997 as a joint initiative of the European Commission and the European
Business Community in India, EBG has come to be recognized by the Indian Government and
the European Commission as the industry advocacy group representing the interest of European
companies and Indo- European Joint Ventures in India.
EBG Federation is supported by the Delegation of the European Union to India and works
towards promoting, propagating and safe guarding European business interests in India. The EU
Ambassador is our Patron.
Currently EBG Federation has Chapters in Delhi, Mumbai, Bangalore and Chennai with
approximately 170 companies as Members.
The primary objective of EBG Federation is to actively support growth in India-EU trade relations,
and become the most relevant advocacy Group for European business in India and ensure that
the needs of European business are well presented to policy and decision makers.
Every year the EBG publishes an influential “Position Paper” which highlights the group’s views on
policy. The European Business Group (EBG) Position Paper is a collective expression of the views
of the members of EBG and supported by knowledge partners on key aspects of the business
environment in India such as ‘ease of doing business’. The EBG Position Paper proposes key
policy reforms that will be conducive to the growth of business and what we believe are in the
realm of possibility for the Indian Government to put in place.
The 2016 edition of the EBG Position Paper will cover the following key sectors, including
Agrochemicals, Alcoholic Beverages, Automotive, Aviation, Banking and Financial services,
Chemicals & Petrochemicals, Defence, Energy- (Oil & Gas, Power), FMCG, Healthcare, Homeland
Security, ICT & Innovation, Logistics, Real Estate, Retail and Telecommunications.
EBG FEDERATION

Acknowledgements
Sector Paper - Aviation
Knowledge Partner – Mr. Amber Dubey, KPMG and the sector committee members
Sector Paper - Logistics
Chairman – Mr. Julian Michael Bevis, Maersk Group and the sector committee members

Message from Mr Raman Sidhu, FCA
Chairman, EBG Federation, India
EBG Federation, India, the erstwhile European Business Group (EBG)
functions as the focal advocacy point for companies, which represent
European Union (EU) business interests in India. EBG Federation, aims
to promote Europe as India’s most preferred business partner thus
creating an environment that allows European Business to flourish.
It is intended that the initiatives and activities undertaken by the EBG
Federation should complement and reinforce those of EU member states,
EU business groups and EU diplomats.
Its principal objectives are:
• To facilitate and promote European businesses in India in achieving
their business and investment goals
• To improve trade and business relations, between the EU and India for mutual benefit and to further their
interests and ease of doing business
• To partner with India in its progress towards realising its full growth potential
Over the years, EBG has been publishing an Annual policy document, the EBG Position Paper which has
today emerged as an important document that reflects the diverse presence of European companies in
India and the state-of-art technology which they bring in the different sectors that they operate in. The
purpose of this document is to enable the EBGF to express the views of its members on some key aspects
of the business environment that prevails in India that has a direct bearing on the ease of doing business in
the country and recommend solutions which are in the realm of doability.
This paper acts as the base document for the next 12 months and intends to facilitate discussion with the
relevant Ministries of the Government of India and other relevant stakeholders to seek action on the issues
raised. EBGF believes that by opening a dialogue on these issues further progress can be made to resolve
differences and enhance EU-India business relations to benefit both partners.
EBGF has always played an instrumental role in advancing business interests of EU Corporates and EU-
India Joint Ventures.
I am delighted to present to you EBG’s Position Paper 2016 which covers 17 key sectors, including
Agrochemicals, Alcoholic Beverages, Automotive, Aviation, Banking and Financial services, Chemicals
& Petrochemicals, Defence, Energy- (Oil & Gas, Power), FMCG, Healthcare, Homeland Security, ICT
& Innovation, Logistics, Real Estate, Retail and Telecommunications. This is the 14th Position Paper in
the Annual Series. This year’s paper sees an inclusion of 1 more sector coverage over the last year –
Agrochemicals.
EBGF maintains, along with the EU Delegation to India and EU agencies a continuing dialogue with
Government of India and its agencies to pave the way for a smoother progress for this most important EU-
India partnership. EBGF thanks the EU Delegation and other EU Country Missions and Government of India
for their support in our endeavors. I also thank the EU Heads of Misison for giving us their support through
their message for this Position Paper which finds a pride of place in this document.

Chairman’s message
EBG Federation is very grateful to its Chapter Chairs, Sector Committee Chairpersons, Co-Chairpersons/
Members and Ms Neema Sunil Kumar, General Manager of the EBG Secretariat as well as its knowledge
partners who with great dedication, commitment and valuable personal time inputs have helped the sector
committees put together this Position Paper 2016. A very special thanks to BMR Advisors and Mr. Mukesh
Butani for their valuable inputs and for editing this Position Paper. EBG expresses its sincere thanks to Ernst
& Young, Grant Thornton International, KPMG and PwC for fully supporting us for certain sector papers as
our knowledge partners.
I wish this Position Paper, 2016 and the sector committees which have authored them, all success.

Position Paper 2016 | 1
EBG FEDERATIONEUROPEAN BUSINESS GROUP
AVIATION
Become a leading global aviation hub
driven by ever increasing air traffic-
domestic and international. Improve
policy and regulatory framework to
support this growth.

2 | Position Paper 2016
AVIATION
India has a vision of becoming the third
largest aviation market by 2020. Due to the
fall in prices of aircraft turbine fuel (ATF),
steady increase in disposable incomes,
improvement in business sentiment, increase
in tourism and better marketing of Brand
India, the Indian aviation market is on the
upswing.
1. INTRODUCTION
Market description
1.1 The civil aviation market in India has grown
rapidly in the past year. During the 10-month
period from April 2015 to January 2016, the
throughput of international and domestic
passengers stood at 184 million. This is a
whopping increase of 17% over the previous
year. The increase in domestic traffic is even
bigger at 20.6% which is the highest in the
world.
India is one of the fastest growing aviation markets
in the world. Domestic air travel during April 2015 to
Feb 2016 grew at a whopping 20.9%. With 203 million
passenger throughput (domestic plus international)
during the period, India is also one of the largest
aviation markets in the world. It has the potential to
become the third largest in the world by 2020 thanks
to increasing disposable incomes, fall in prices of
Aircraft Turbine Fuel (ATF), increasing domestic and
international tourists etc.
India has a requirement for new airports which is
being partially met by expansion of existing ones and
development of new airports. Aviation is slowly being
recognized as a major driver of economic growth
rather than being ignored as an elitist sector. There
is a push for development of low-cost, no or low frills
airports.
There are several challenges to be overcome. Despite
low oil prices, the structural costs and cascading taxes
in Indian aviation remain high. High fuel taxes, rupee
devaluation, high interest rates and poor infrastructure
in and around airports continue to hurt. Air cargo,
maintenance, repair and overhaul (MRO), general
aviation and human resources development are
lagging. When oil prices increase, industry profitability
would be under pressure again.
The draft National Civil Aviation Policy (NCAP),
released in October 2015, has many interesting
proposals that will aim towards 300 million domestic
ticketing by 2022, which, though ambitious, highlights
the potential of the Indian aviation sector.
India needs to be promoted as a trade and tourism
hub. Non-value adding costs, excessive paperwork
in the digital world, procedural inefficiencies and
layers of taxes need to be ruthlessly attacked. Close
collaboration between the Ministry of Civil Aviation
(MoCA), related ministries (finance, home, defence,
external affairs, commerce and industry, tourism,
environment, HRD etc), industry regulators like DGCA
and AERA; and the industry is key, for reforms on a
regular basis.
Air connectivity in Tier 2/3 cities needs to be improved.
Establishment of the Regional Connectivity Fund
(RCF), abolition of the contentious 5/20 rule, gradual
shifting of the Route Dispersal Guidelines (RDG) under
the Regional Connectivity Scheme (RCS), opening
up of Indian skies and bringing in business friendly
policies are imperative.
With the right policies and a relentless focus on safety,
security, service quality and cost, India would be well
placed to achieve its vision of becoming the third
largest aviation market by 2020 and the largest by
2030.
EXECUTIVE SUMMARY

EBG FEDERATION
India is building new airports and expanding
existing ones to meet the growing demand.
A slew of new airports are on the anvil to be
developed in public private partnership (PPP)
mode. Some of these projects include Navi
Mumbai, Mopa (Goa), Bhogapuram (Vizag),
Agra, Kannur, Singrauli and Kushinagar.
1.2 In addition, various state governments are
looking to operationalize low-cost, no-frills
airports which would further democratize
air travel. This highlights a mindset change
that air travel is not an ‘elitist’ product, but a
time-saving tool and a necessity. Some state
governments are offering viability gap funding
(VGF) for airlines to operate on unserved or
under-served routes.
There are significant challenges to be
overcome. While some Indian air carriers are
posting modest profits, this is primarily due
to the prevailing low prices of crude oil. High
fuel taxes, rupee devaluation, high interest
rates and competitive airfares are some of the
headwinds the industry has to contend with.
Though world class airports have been
developed by the Airports Authority of
India (AAI) and the private sector, there are
significant challenges related to capacity
expansion of airports, land acquisition, fixation
of airport tariffs and delays in regulatory
approvals. Growth of other key areas like
air cargo, maintenance, repair and overhaul
(MRO), general aviation (GA) and human
resource development have been constrained
due to infrastructural limitations and lack of
supportive policies.
1.3 The draft National Civil Aviation Policy (NCAP),
released in October 2015, presented many
interesting proposals to promote growth in
the aviation sector. Its vision to enable 300
million domestic ticketing by 2022, although
ambitious, highlights the hidden potential of
the Indian aviation sector.
1.4 For maintaining the growth momentum,
urgent remedial measures are required. India
needs to be promoted as a trade and tourism
hub in order to derive synergistic benefits for
the aviation industry. Leading aviation hubs
like the US, European Union, United Arab
Emirates (UAE), Singapore and China have
a robust industrial, trading, maritime and
tourism ecosystem that feeds to and from their
aviation industry.
1.5 ClosecollaborationbetweentheMinistryofCivil
Aviation (MoCA), related ministries (finance,
home, defence, external affairs, commerce
and industry, tourism, environment, HRD etc),
regulators and the industry is the need of the
hour. Lack of coordination between them has
hurt aviation in the past.
1.6 India is one of the very few countries in the
world to have built a satellite based navigation
system – called GPS Aided Geo Augmented
Navigation (GAGAN), its payload is already
operational through GSAT-8, GSAT-10 and
GSAT-15 satellites. The GAGAN system
is a satellite-based augmentation system
that complements the capability of the
existing global navigation satellite system by
providing reference signals that have greater
accuracy, integrity, coverage and continuity
primarily within India and countries in South
Asia/South East Asia. It is an advanced air
navigation system, which has applications
beyond aviation. This next generation
system is expected to enhance India’s total
air capacity, flight safety and overall cost
efficiencies.
1.7 In the past decade, India has witnessed
significant growth in the number of operators
with non-scheduled operator permits (NSOP).
There are 126 operators with 393 aircrafts
today as compared to 36 operators and 106
aircraft in 2000. Of the total 81 NSOP domestic
operators, the top 15 operators accounted for
more than half the total number of domestic
flights operated in the year 2014-15. Of the total
27 non-scheduled international operators, the
top 15 operators accounted for 90% of the
total number of international flights operated
in 2014-15.
1.8 The Indian maintenance, repair and overhaul
(MRO) sector has considerable potential

AVIATION
for growth as the fleet size of Indian carriers
increase. However, due to unfavourable
taxation regime and lack of space and
infrastructure at airports, the MRO sector
in India is not achieving the potential it can
reach. The current size of the MRO market in
India is US$900 million (€789 million) which is
slated to grow to US$1.5 billion (€1.3 billion)
by 2020. An estimated 90% of the MRO spend
by airlines in India are outside of India due to
structural roadblocks in India.
The draft NCAP lays special emphasis on
promoting civil aerospace manufacturing.
Incentivising civil aerospace sourcing through
defence offsets, reaching out to global original
equipment manufacturers (OEM) to set up
their manufacturing facilities in India and
promoting MRO facilities in India are some of
the key policy initiatives.
Recent Developments
1.9 The draft NCAP
EBG welcomes the draft NCAP. This is the
first time a comprehensive policy document
has been put together by the government.
It is futuristic, industry friendly and reform
oriented. It has been drafted after several
rounds of discussions with various industry
bodies, aviation industry and the government
ministries. The final version of the NCAP is
expected to be released in April 2016.
The draft NCAP plans to facilitate rapid
growth by way of fiscal support for regional
connectivity, direct cash subsidies to regional
carriers, reduction in fuel prices, rationalization
of taxes and royalties, and various other
procedural reforms.
One of the most important initiatives proposed
is the regional connectivity scheme (RCS) to
boost air travel in smaller towns. Under the
scheme, the government will work towards
revival of un-served airports, build no-frills
airports and also give incentives and subsidies
to stakeholders. This will be funded by way of
a 2% RCS levy on all air tickets.
The Regional Connectivity Fund (RCF) so
created will provide viability gap funding for
airlines operating on RCS routes. This will
give a fillip to the local economy, tourism and
employment creation.
The draft NCAP talks of conferring
‘infrastructure’ status on MRO, ground
handling, cargo and ATF infrastructure at the
airport, which will lead to cheaper financing
and a 10-year waiver of corporate tax.
MRO has been supported by way of zero
rating of service tax and simplification of
import procedures. Almost 90% of MRO
expenditure of Indian carriers is done outside
India, primarily due to tax anomalies. This is
likely to be reversed thanks to the reforms
proposed. The duty free period for MRO parts
and tools is being increased and so is the
duration of stay of foreign aircraft coming to
India for MRO.
The NCAP talks of reforms in global
connectivity by way of open skies with
countries beyond a 5,000 km radius from New
Delhi. It also plans to relax norms for bilateral
seat quotas and code share between airlines.
Helicopters and small aircraft will be promoted
for last mile regional connectivity and for
rapid medical evacuation. They will receive
enhanced seat credits that can be traded with
larger carriers to meet their obligation under
route dispersal guidelines (RDG). Charter
operations have been significantly liberalised.
The draft NCAP talks of significant reforms
at the Directorate General of Civl Aviation
(DGCA), which will strive to create a single-
window system for all aviation related
transactions, queries and complaints. The
services rendered by DGCA will be fully
automated by implementing the eGCA project
on priority.
All in all, NCAP 2016 will be a significant effort
by MoCA to put Indian aviation on a high
growth trajectory. It needs to be implemented
in letter and spirit.
EBG feels that the industry now has to step
up and leverage this opportunity. All this may
help India achieve its ambition to be the third
largest aviation market by 2020 and the largest
by 2030.

EBG FEDERATION
1.10 The Make in India campaign
The government of India has launched
the Make in India campaign to boost local
manufacturing. The campaign has caught the
attention of Indian and foreign investors. The
government has been regularly organizing
sector-specific events to understand and
resolve the issues faced by the investors.
Several states have come up with a state-
specific policy for aerospace and defence
manufacturing.
For the Make in India initiative to be a
success in civil and military aeronautical
manufacturing, the government will need to
take a number of fundamental steps. These
include replacing the Defence Procurement
Procedure 2013 (DPP 2013), redesigning
the defence offsets programme, enhancing
the FDI limit and ease of doing business,
reducing the role and importance of the
Defence Research and Development
Organization (DRDO) and Defence Public
Sector Undertakings (DPSUs), enhancing
safeguards for intellectual property rights
and promoting the India private sector.
EBG feels that fiscal and monetary incentives,
faster approvals and availability of land,
infrastructure and skilled manpower will be
crucial to convert India into a world-class
aerospace manufacturing hub.
2. GENERIC INDUSTRY ISSUES
2.1 High cost of ATF
EBG appreciates the fact that the draft policy clearly
acknowledges the problem of high ATF cost in India.
ATF in India is almost 60-70% costlier than the global
average due to policy apathy in the past, opaque
pricing structure and the multitude of taxes - excise,
customs, VAT.
High ATF prices in the past have led to air travel
remaining the preserve of the well-off. Since international
ATF prices are low, an all-expense paid trip to Thailand
or Malaysia can sometimes turn out cheaper than flying
within India. India’s skewed pricing policy on ATF has
brought more harm to the country than good.
EBG feels that the government should abolish central
taxes of customs and excise on ATF. The multiplier
effect of aviation and tourism will bring in tax revenue far
in excess of the few thousand crores the government
may forego at the raw material stage.
EBG supports the government’s vision for a regional
transport aircraft as short haul operations are
expensive to run. Regional transport aircraft is an
enabler towards the social and economic development
of these unserved markets. However, it will be very
important to develop the right solution to suit the
Indian context and requirements. It should not involve
developing a fully indigenous aircraft from scratch but
collaborating with other leading players and finding
a best fit from available off the shelf technology and
Indian customization.
To enhance connectivity and associated growth,
India is making significant progress in modernizing
its established airports. EBG appreciates the
government’s plans for increasing the number of low
cost airports in tier II-III cities. Financial support and
close monitoring will be required for timely completion
of infrastructure projects.
2.2 The 5/20 Rule
The ‘5/20 Rule’ prevents Indian carriers from flying
abroad till they complete five years and have a fleet of
20 aircraft. No leading country in the world has such
a rule. EBG feels that abolition of this rule would be a
great step forward. Such policy impediments create
artificial entry barriers and put Indians carriers at a
disadvantage against foreign airlines.
Full utilization of the available bilateral slots by Indian
carriers should be encouraged. On routes where
global airlines have exhausted nearly 90-100% of their
quota, the government should consider requests for
enhancing the quota by another 20-30%.
Many airports in India are constrained by restricted
landing slots during peak hours. EBG feels that
incentives should be provided to airlines to operate
larger aircraft, thus boosting airport capacity. This
would release the immediate pressure on infrastructure
whilst alternative long term solutions such as airport
upgrade or development of secondary airports are
sought.

AVIATION
3. KEY ISSUES &
RECOMMENDATIONS
3.1 Airlines
The airline landscape in India has transformed
radically in recent years. In 2005, there were just four
main carriers - Air India, Indian Airlines, Jet Airways
and Air Sahara, all operating full service models -
plus several small airlines. By 2015, there were seven
pan-India carriers - IndiGo, Jet Airways, Air India,
SpiceJet, GoAir, Vistara and AirAsia India. In addition,
regional carriers such as Air Costa, Air Pegasus and
Trujet provide much needed regional connectivity.
In these two decades, 17 airlines have shut down
and accumulated losses of operating airlines are a
staggering INR 60,000 crore (€7.8 billion).
Indian domestic traffic grew by 20.6% during April
2015–January 2016, the highest in the world. This is
despite the fact that domestic ATF prices are still 60-
70% higher than global prices. If oil prices continue
to be rationalised along with other measures, we may
see 18-20% growth for the next three years. That may
take India closer to its vision of becoming the third
largest aviation market by 2020.
Recommendations
(a) Notify ATF as a ‘declared good’. ATF should
have a uniform levy of 5% or less across
India. ATF for aircraft weighing under 40 tons
is already a ‘declared good’. It is far wiser to
generate tax from downstream goods and
services than an industrial raw material. F. ATF
in India should be brought within 10% of the
global average price for a 10-year period to
give a fillip to national air connectivity.
(b) Finalise NCAP and notify changes in tax
structure for aviation sector. NCAP proposes
that MRO, ground handling, cargo and ATF
infrastructure co- located at an airport will
get the benefit of ‘infrastructure’ sector, with
benefits under Section 80-IA of Income Tax
Act. The restriction of being ‘co-located at
the airport’ should be dropped since many
of the facilities are also located off-airport.
Among other things, the draft NCAP 2016 also
proposes zero-rating of service tax on MRO
and exemption from service tax on tickets and
excise duty on ATF at airports covered under
the regional connectivity scheme (RCS).
These need to be implemented quickly.
(c) Allocate INR 1,000 crore (€131.5 million)
as seed funding for the proposed regional
connectivity fund (RCF). RCF will provide
VGF (viability gap funding) funding for air
connectivity in Tier 3-4 locations based
on a thorough feasibility analysis. This will
complement the 2% levy to be applied on
domestic and international flight tickets.
(d) Remove artificial constraints like FDI limit and
bilateral quotas. Airlines are the last bastions
of protectionism like defence, insurance and
the media. Far more risky sectors like telecom
and banking have been opened up with no
adverse impact on Indian companies, as
predicted by vested interests earlier.
The whole sector boomed, and so did the
fortunes of the Indian players. The consumers
gained and so did India. The same may
happen in aviation. Doomsday theories about
cash-rich Gulf carriers killing Indian carriers is
sheer propaganda. If they want, Gulf carriers
can collaborate with any willing Indian airline,
with or without buying an equity stake, utilize
the Indian part of the bilateral quotas, and get
involved in the Indian domestic sectors also,
all within the law.
(e) Announce a clear road-map for privatization of
Air India. Else Air India may continue to bleed
under increasing competition, falling market
share and increasing costs. The taxpayers
funds thus saved can be used to provide
compensation to states for forgoing VAT on
ATF and to fund the RCF.
3.2 Airports
The Airports Authority of India (AAI) manages a total
of 125 airports, which include 11 international airports,
eight customs airports, 81 domestic airports and 25
civil enclaves at defence airfields. AAI also provides
air traffic management services (ATMS) over the
entire Indian air space and adjoining oceanic areas
with ground installations at all airports and 25 other
locations to ensure the safety of aircraft operations.
AAI has entered into joint ventures at Mumbai,

EBG FEDERATION
Delhi, Hyderabad, Bangalore and Nagpur Airports
to upgrade these airports and emulate the world
standards. Cochin is run as a PPP airport albeit with
significant involvement of the government of Kerala in
its day to day management. A new model is emerging
wherein Changi Airport may take over the terminal
and city-side operations of Jaipur and Ahmedabad
airports.
However, India is investing less than is required for
the expanding passenger and cargo traffic. Mumbai,
Chennai, Pune and Goa airports are severely
constrained. Delhi airport may get saturated in the
next 10 years.
Infrastructure needs to be ahead of the demand
curve if we have to improve the level of service, along
with safety and security. India’s investment pipeline
for airport upgrading and expansion is around US$5
billion (€4.3 billion) which is inadequate for meeting
the requirements of airport expansion in India. In
comparison, China has a plan to invest US$130
billion (€114 billion) in airports over the next 15 years
while UAE plans to invest over US$46 billion (€40.3
billion).
It is estimated that among the 30 largest non-metro
airports operated by AAI, 40% are already estimated to
be operating over their design capacity. This is despite
the fact that the Twelfth Five Year Plan envisaged INR
70,000 crore (€9.2 billion) of investments in airports.
Several greenfield airport projects are at different
stages of bidding and construction. The most
anticipated one is the Navi Mumbai international
airport. With the main Chhatrapati Shivaji International
Airport (CSIA) getting increasingly congested during
peak hours, it will provide much needed capacity
to meet the growing demand for air transport in
the Mumbai metropolitan region, which saw 14.4%
growth in traffic from April 2015-January 2016.
The second airport for Goa at Mopa has also seen
progress with bidders being shortlisted for the RFP
stage. Construction of a new airport in Kannur,
Kerala, is underway. Construction of the new
international terminal at Cochin airport is understood
to be progressing as per schedule and expected to
be commissioned in May 2016. In Andhra Pradesh,
a greenfield international airport is planned near
Visakhapatnam at Bhogapuram, the bidding for which
is expected to commence soon.
Recommendations
(a) Top hub airports like Atlanta, Beijing, Dubai
and Chicago are driven by their hinterland
economy, home carriers, efficient processes
and ‘open skies’. India lost out on all counts.
It has a weak national carrier, the hinterland
economy around leading airports is small,
Indian tourism traffic is negligible, the
processes -- visa, immigration, customs and
airport transfers -- are inefficient and there is
no open skies agreement with any country
other than the US. EBG feels that there is
urgent need for hubs to be developed in India
so as to leverage the benefits of aviation to the
maximum.
(b) In India, policymakers till recently never really
took aviation seriously, despite its deep impact
on GDP, infrastructure development, tourism
and job creation. It is the spectacular success
of the city-states like Singapore, Hong Kong
and Dubai -- and lately Qatar and Abu Dhabi
-- that woke up India. The arrival of the LCC
(low cost carriers) boom and the airport
privatisation around 10 years back made
India realize the cost of inaction. The aviation
leadership has been passed on to India’s
competitors in the Gulf and ASEAN region. It
will be tough to take them on but the battle has
to begin at the earliest.
(c) ATF prices for international carriers at Indian
airports is almost 30-35% costlier than at
international hubs. It’s a self-defeating policy.
Many global carriers therefore tank up in
their home locations and India loses out that
revenue. This will hopefully be addressed in
NCAP 2016.
(d) For procedural efficiency at hub airports,
mind-set changes are critical. Domestic to
international terminal transfers in Delhi and
Mumbai are still done through coaches
moving through city traffic. It’s important
to carry out minimum connect time (MCT)
analysis to ensure faster movement of
passengers, luggage and cargo between
connecting flights. Air-side terminal transfers,
dynamic gate management, dedicated
bag screening for ramp to ramp transfers,

AVIATION
dedicated immigration counters for specific
airlines at a fee, inexpensive dorm rooms for
transfer passengers etc. are some options.
EBG suggests that central authorities like
customs, immigration and the Central
Industrial Security Force (CISF) need to sign
service level agreements with leading airports
-- they at times operate in silos and often
lack the empathy that international travellers
expect.
(e) The failure of the tourism sector in India
has hurt its status as an aviation hub.
This is despite being blessed with huge
opportunities in terms of religious, cultural,
historical and nature tourism. Most global
tourists bypass India for places like Bali,
Phuket and Langkawi primarily because of
poor air connectivity, intra city travel and
inadequate hotel facilities especially in non-
metros, bad last-mile road connectivity, poor
maintenance of monuments etc. Harassment,
overcharging and molestation of tourists and
terror incidents have hurt India’s image. All
this may need to be overturned with time and
focused efforts.
3.3 MRO
The Indian MRO is an industry with huge potential
but faces hurdles in becoming an effective value
chain. Every industry needs a sustainable value chain
investment to create a holistic self-sustaining business.
Various MROs have set up operations in India but the
industry is still left wanting when it comes to getting
business from airlines.
Although the hurdles are taxation and bureaucratic in
nature, removing these hurdles will only solve one part
of the problem. There is a need for the government
and MRO players to educate and promote new
investments in this long term sector with a view to
develop downstream MRO support shops.
One basic of a downstream value chain in MRO is
the availability and presence of aircraft spare parts
warehousing and trading companies. Without the
availability of such services, large inventory costs and
frequent movement of parts outside India will keep the
value addition in terms of ‘value for time and money’
unpredictable.
The MRO spend of Indian carriers currently stands at
$900 million (€789 million), which is expected to touch
$2.5 billion mark (€2.19 billion) by 2020. Only around
10% of this is carried out within India. Indian carriers
prefer to get their fleet serviced in places like Colombo,
Singapore and Malaysia due to the prevalent tax
structure in India.
The MRO industry in India is marred by a self-defeating
tax structure, troubles in customs clearances,
airport royalty, space constraints and lack of quality
manpower. The regulatory labyrinth has prevented the
Indian MRO industry from achieving its full potential.
Recommendations
(a) Apply zero rate of VAT on MROs: VAT at the
rate of 12.5-15% is levied on aircraft parts
imported by MRO service providers, whereas
no such tax is levied on airlines importing their
own spares for self-consumption. Further,
VAT is levied on selling price and not on
cost price, which effectively makes the total
tax component to be around 20-22%, when
added with service tax.
Today, there is miniscule VAT collection on
aircraft spares since most high value spares
are purchased by Indian carriers abroad. So
there’s no actual loss if VAT is zero-rated.
Maharashtra is the first state to exempt VAT
on MROs. Zero rating of VAT would enable
development of MRO infrastructure in India.
The government would earn significantly
larger revenues from the multiplier effect of
MROs, generation of local employment spend
and growth of ancillaries.
(b) Sale of aircrafts parts and consumables
should be brought under ‘declared goods’.
This would ensure uniformity of a low VAT rate
across the country. If the size of the MRO pie
is made 10 times larger, a smaller percentage
of VAT would yield much higher revenue for
the state than imposing a higher tax rate on a
miniscule pie.
(c) Apply zero-rate of service tax on MROs. In
case an MRO activity is undertaken in India,
service tax is levied at the rate of 14.5%,
which will now rise to 15% from June 1, 2016.
However, in case such repairs are undertaken

EBG FEDERATION
outside India, service tax is not charged. This
makes the Indian MRO industry uncompetitive
with respect to other neighbouring countries.
Zero-rating of service tax would help create
a level playing field for Indian MROs vis-a-vis
foreign MROs.
3.4 General Aviation
General aviation (GA) is amongst the most neglected
businesses within the aviation sector. This is despite
the fact that one of the biggest users of general aviation
services are policymakers themselves.
The biggest challenge GA faces is its perception as
an ‘elitist’ product. That has become a self-fulfilling
prophecy. No policymaker wants to bat for this industry
for fear of being perceived as ‘pro-rich’.
Ironically, no place in the interior of India can develop
as an industrial hub unless it has air connectivity.
And the first ones to provide air connectivity are GA
operators. The scheduled carriers come much later
once the place becomes big enough to justify a large
aircraft. GA also help in bringing in tourists – especially
high end ones.
The air charter business has been done in by an
unfavourable policy environment, an abnormally high
20% import duty, curfew hours at large airports during
peak hours, poor infrastructure at smaller locations,
stiff procedures from local authorities for landing
permissions etc. and high airport charges.
The fleet size of charter aircraft in India is abysmal –
around 110 jets, 220 helicopters and 75 turboprops.
The number in most developed economies is in the
thousands. There, it is treated as a time saving tool
rather than a luxury.
The general aviation industry in India is hit by several
bottlenecks. The lack of dedicated policy and separate
regulatory framework is an impediment in achieving its
potential. Complicated regulatory procedures, marred
by delays and the cascading tax effect, makes non-
scheduled operations an expensive proposition.
Recommendations
(a) GA needs urgent policy and procedural
support. They need to be treated as a catalyst
of economic development than a ‘rich man’s
game’. The approval processes for aircraft
import, safety checks and landing permissions
need to be made online and faster. The heavy
import duty and airport charges imposed
on them need to be rationalised. Else, it will
remain a rich man’s game.
(b) The draft NCAP does have some interesting
reforms for charters flying to airports covered
under the regional connectivity scheme and
for incoming charter aircraft with foreign
tourists.
(c) With the current traffic load of scheduled
flights at metro airports, GA aircrafts often
get lower priority as compared to scheduled
operators. Delays in take-off and landing
clearances defeat the purpose of investments
in GA aircrafts. A joint review committee
should be formed by MoCA and DGCA with
representation from GA stakeholders to
review the existing regulatory and operational
framework.
(d) It is important to develop supporting
infrastructure at airports in Tier 2/3 cities to
boost the GA industry. This should include
night-landing facilities, enhancement of
passenger amenities and state support in
statutory services, like security. GA facilities
at metro airports need an upgrade in terms
of dedicated terminal, entry point, apron and
parking space etc.
(e) Non-operational airstrips need to be upgraded
in places of economic significance such as
ports, mines, industrial clusters and tourist
locations. These need to be done at the lowest
possible cost without compromising on safety.
The airstrip may attract a small number of GA
flights initially and if it has a strong business
case, it may ultimately lead to full scale
operations in future, with significant benefits
to the local economy.
(f) GA aircrafts and helicopters at times use
airportsandhelipadsthatarenotinregularuse.
It is extremely important for MoCA to create
a reliable and regularly updated database of
all airports and airstrips in the country. It is
also important to improve coordination with
IAF airfields and introduce basic low-cost
navigational aids in these small airports.

AVIATION
(g) Development of heliports is important to
support the growth of GA in India, especially
in areas that cannot have runways due
to financial constraints or terrain-related
challenges. MoCA may consider developing
a PPP policy for development of heliports.
There is a need to develop standardized route
operating procedures for helicopters.
(h) The draft NCAP 2016 has proposed a slew
of reforms to support the helicopter industry.
The same should be implemented in letter and
spirit, especially for use in intra-city travel and
medical evacuation.
(i) Monitoring of over 126 GA operators may be
a mammoth task for DGCA. The numbers are
expected to increase in future. The option of
a separate monitoring and facilitation agency
for GA may be evaluated by MoCA.
3.5 Air cargo
Air cargo, though just around 1-2% of the global cargo
movement, contributes to around 32-35% by value
of cargo shipped. It is critical for industries such as
pharmaceuticals, electronics, marine exports and
floriculture where shipments are highly time-sensitive.
Hence, the development of air cargo requires deep
focus.
The Indian air cargo industry is a classic case of high
potential but low achievement. This is despite the
many advantages we enjoy in terms of economic
growth, demographics and location.
The Indian government adopted the open skies policy
for the air cargo sector in the early 1990s; under this,
Indian or foreign carriers were allowed to operate
scheduled and non-scheduled cargo services to/from
any airport in India. The period since the adoption
of the open skies policy has seen strong growth in
international air cargo traffic, which can be attributed
to a sizeable growth in scheduled services operated
by Indian and foreign airlines.
In FY2014-15, India handled a total cargo throughput
of 2.52 mmtpa (million metric tonnes per annum).
This pales in comparison with airports like Hong
Kong, Memphis, Shanghai and Incheon which
handle more throughput than ALL Indian airports
combined. In FY2014-15, domestic air cargo sector
grew 18% on the back of the e-commerce boom.
This year, the cargo traffic during April 15-January
16 has grown by 6.1%, with domestic cargo growth
falling to just 5.4%. Surely there’s something amiss
here.
Recommendations
(a) Strengthen the Air Cargo Logistics Promotion
Board (ACLPB): ACLPB can help in the
organized growth of this sector by enabling
policies and facilitating planned development
of air cargo hubs in the country.
(b) Air cargo to be afforded infrastructure status
as per the draft NCAP 2016.
(c) Introduce the concept of cargo village at all
hub airports. This would help consolidate all
agencies, regulators, service providers and
functionalities within the airport’s cargo facility
and decongest the cargo terminals.
(d) Assist in formulating the quality of service
(QoS) parameters for various stakeholders in
the air-cargo supply chain including ambitious
objectives such as reduction of cargo dwell
time to below 24 hours by December 2016
and six hours by December 2017.
(e) Facilitate development of air freight stations
(AFS): AFS was conceived as a means to
reduce congestion in airport premises by
permitting transfer of cargo to customs notified
freight stations.
(f) Facilitate expansion of cargo fleet: Freighter
aircrafts play a vital role in increasing the
cargo throughput of the country. There is no
consistent policy for allotment of dedicated
facilities at any of the airports for dedicated
cargo aircrafts. There is lack of dedicated
terminal space and facilities for express airlines
with limited scope for adequate expansion.
Restriction on night operations and high
lease rentals has made setting cargo aircraft
operations a costly proposition. There is
urgent need for policy support and robust
infrastructure to ensure efficient freighter
operations in the country. Dedicated cargo-
focussed airports can be developed to ensure
that cargo gets priority. These airports would
allow peak operation during night hours, have
good connectivity with transport infrastructure

EBG FEDERATION
and would be close to industrial areas to
ensure a critical customer base for cargo.
(g) Extend risk management system (RMS) facility
for exports: RMS has shown excellent results
on the imports side. Customs authorities
should consider introducing RMS for exports
at the earliest possible to minimize congestion
on the apron and the resultant damage and/or
pilferage.
(h) Simplify customs processes and
documentation through full adoption of
EDI (electronic data interchange): Customs
should go for full EDI adoption for import/
export registration, clearance, drawback
and e-payment of duty. This might release
considerable manpower/man-hours in the
existing pool, which can contribute in part to
24x7 operations.
(i) Customs and security policies and procedures
for transhipment differ at various airports.
There is urgent need for standardization of the
same.
(j) A major thrust towards migrating to paperless
environment can come from the proposed
e-freight initiative of IATA being adopted in other
countries. E-freight aims to take paperwork out
of air cargo supply chain and replace it with
cheaper, more accurate and reliable electronic
messaging. Facilitated by IATA, the project is
an industry-wide initiative involving carriers,
freight forwarders, ground handlers, shippers
and customs authorities. The government and
industry should work together to ensure its
rollout in India at the earliest.
Human Resource Development
Aviation is a capital intensive sector and one important
factor that influences future expansion and investments
is availability of skilled and employable manpower.
Indian aviation’s growth story could be severely
limited by the lack of human resource across the value
chain, including but not limited to pilots, cabin crew,
engineers, air traffic controllers and ground staff. The
government has taken a welcome step by initiating a
task force focused on skill development.
The government and industry should come together
to ensure continued training and adoption of high
standards of operational safety. Aviation institutions
should be given financial assistance by the government
and monitored for quality standards.
Recommendations
(a) Enhance pilot training infrastructure. India
currently has over 5,000 commercial pilots.
With the increase in fleet size due to large
orders from Indian carriers, India will require a
total of around 9,000 pilots by 2018.
(b) Shortage of pilots leads to an artificial
increase in their salary levels which hurts
the profit margins of airlines, especially the
LCCs. There is a need to increase the number
of world class pilot training academies by
way of capital subsidies. Gradually these
academies can produce pilots for global
markets also.
(c) Foreign investment in pilot training academies
needs to be encouraged. The success of
the CAE academy in Rae Bareli and Gondia
should be replicated in other locations
also. Certificates issued by leading flying
academies in the developed world should be
made acceptable in India and should be given
faster clearances by DGCA.
(d) Many developed countries allow trainee pilots
to get a commercial pilot license (CPL) within
12-15 months of training vis-à-vis two years in
India. DGCA should consider evaluating how
the training duration in India can be brought at
par with global norms without compromising
on safety standards.
(e) DGCA should also consider increasing the
frequency of exams from four per annum to at
least one per month in the short term and on
a weekly basis in the long term through use
of modern fail-safe examination technologies
used for GMAT, SAT, CAT etc.
(f) The Indian Air Force (IAF) has one of the finest
pilot training infrastructures in the country.
There is need to collaborate with them to
explore ways in which their facilities and staff
canbeusedforproducingcivilianpilotswithout
affecting IAF’s operational requirements.
(g) ATC training academies: The number of air
traffic control officers (ATCO) has grown

AVIATION
to around 2,600 in 2015, but there is still a
shortage of around 1,500 ATCOs. Given the
unique nature of this service - zero tolerance
for error and high levels of technical skills
required - this shortage is a cause for severe
concern. AAI runs ATC training facilities at
the Civil Aviation Training College (CATC),
Allahabad, and at the Hyderabad Airport.
Partnership options with international ATC
training institutes should be explored to
enhance capacity of CATC. The enhanced
capacity can also help CATC earn additional
revenue in the long run by training foreign
ATCOs and providing consultancy services to
global ATC service providers.
(h) MoCA may consider the option of allowing
private players to set up ATCO training
facilities, subject to adequate supervision by
AAI. This may be started in a PPP mode first
and thereafter be made fully open to private
sector in the long run.
(i) MoCA should set up four National Aviation
Universities (NAU) and support the
upgradation of flying academies and Aircraft
Maintenance Engineering (AME) training
centres across the country. MoCA may
consider fiscal and monetary support to
these institutes for a period of ten years and
then withdraw the same once they become
self-sustainable.
(j) The government should work with National
Skill Development Corporation (NSDC) for
skill development programmes specific to
the aviation sector such as airline operations,
ground handling, airport utilities and airport
retail.
4. CONCLUSION
European businesses and investors have been long
term partners of India, working with India to develop
state of art technology, products, services and talent.
In 2004, India became a strategic partner of EU. The
EU-India Joint Action Plan of 2005, revised in 2008,
aims at realising the full potential of this partnership in
key areas of interest to India and the EU.
The EU-India Civil Aviation Cooperation Project was
launched in 2010. The objective of the programme is to
strengthen the institutional capacity of the civil aviation
regulator in India and to help ensure a safe and secure
aviation environment, mainly through improvement of
skills in the sector, implementation of international civil
aviation standards, policy support and harmonization
with EU best practices.
EBG is convinced that India has tremendous potential
to establish itself as a global aviation hub, provided
it can implement some of the long-pending reforms
highlighted in this paper. The draft NCAP is a timely step
and will need relentless focus on its implementation in
letter and spirit.
EBG believes a visionary, reform-oriented, civil aviation
policy will certainly help the Indian aviation industry
achieve its vision of being number three by 2020 and
number one by 2030.

Logistics Position Paper 2016 | 13
EBG FEDERATION
LOGISTICS
To create a logistics industry in India comprising
both domestic and international operators,
that will deliver cost effectiveness that is at the
least equal to India’s principal competitors and
thereby to ensure the success of the make in
India strategy.

14 | Logistics Position Paper
LOGISTICS
EXECUTIVE SUMMARY
In 2015 and going into 2016 the Logistics sector has
continued to suffer from a wide range of systemic
problems. In consequence, India’s logistics costs,
which are a significant contributor to manufacturing
and other trade related costs are high compared to
her competitors. The adverse effect upon India’s
competitiveness in international markets is self-
evident. Similarly India’s “ease of doing business”
rating in the logistics sector, while improving,
remains low.
In response, government’s attention is now more
focused upon the sector than was the case hitherto,
which is clearly positive. This focus needs to be
sharpened and the pressure for delivery increased
significantly if the all-important cost competitiveness
index is to be materially changed. To help facilitate
such change the industry itself must work more
closely with government to improve the standard and
level of interaction across all stakeholders. Failing this,
damaging misapprehensions will persist.
Itiscommendablethatgovernmentisnowaddressing
the creation of more physical infrastructure across
most sectors, but delivery needs to improve. Further,
there is a need to recognize that infrastructure is not
just about physical assets. It is as much about the
regulatory environment where there remain many
policy distortions and inefficiencies. The propensity
of government to regulate by policy diktat as
opposed to allowing the market, where it is effective,
to rule and to determine prices needs to be curbed.
It follows also that for effective markets to emerge
there must be adequate scale, thereby giving cargo
interests the ability to exercise free choices between
suppliers. Unless and until such mechanisms can
be brought to bear costs will not start to decline
materially. It also has to be acknowledged that the
development of effective markets takes time and
that therefore the use of regulators in some sectors
where egregious monopolies persist, as is the case
with railways, is essential. Rail costs in India are
unnecessarily high for freight and greater exposure
to regulation of both price and practices is de rigueur
if rail is to recapture volume.
Internal market effectiveness in logistics will be
much enhanced with the implementation of a
consistent set of GST rules. The present confused
tax structure is a major impediment across all
sectors. Similarly the fact that customs regulations
are inconsistent and unduly complicated is a burden
upon the collecting agencies and industry alike. The
implementation of community systems in ports and
airports alike is essential.
The road freight sector remains a particular challenge
being faced with poor highways, an extraordinary
patchwork of legislation in some respects and a
marked absence of the necessary enforcement in
others. In this sector safety standards simply must
improve and need to be a joint focus of industry
and government. It is well understood that this is a
difficult area and hence the importance of industry/
government cooperation.
Across all sectors the introduction of uninterrupted
electronic communications to facilitate processing
and transparency is a high priority. Policy distortions
like the outdated cabotage rules in the shipping sector,
and restrictions in the aviation sector, all of which
ultimately adversely affect the market and indeed the
common man, require swift examination to improve
market effectiveness.
The list of issues is daunting but the prospects for
progress are improving . The government of India is
clearly alive to the challenges and must work now
to transform excellent intent to delivery. The logistics
industry needs to be part of this transformation and to
work collaboratively to the common aim of creating an
effective and efficient market.

EBG FEDERATION
1. INTRODUCTION
This document is the third attempt in the series of summaries of issues that face European
logistics providers serving India. The objective of the document is to provide an agenda
for discussion between the European logistics industry and the various Indian stakeholders
in government, regulatory, statutory bodies, infrastructure providers and so on. These
discussions should aim to develop collaborative solutions to the issues identified.
The paper is reduced in content as compared to previous editions which had proved too
voluminous. The object is simply to list the main issues as a prelude to engagement with
government. Thus, for each section, key issues for discussions are listed. The background
has changed. There is clear recognition by government at a senior level of the importance
of logistics to the health of the economy and to the success of the programmes that are
designed to improve its performance. Delivery though remains a problem, and issues remain
in the key areas of competitiveness and ease of doing business. Generally, the logistics
industry is not able to deliver the level of service that is required. For as long as these issues
remain, Indian manufacturing will remain uncompetitive. As previously, the paper does not
seek to provide answers. These will only come through comprehensive, open engagement
between industry and institutional stakeholders.
A number of sections have been deleted, a brief section on railways has been added.
2. COMMON THEMES, MAIN
RECOMMENDATIONS
There are a number of common themes across all
sectors. These are summarized below. It is believed
that unless these principles can be adopted, progress
is likely to be slow at best.
2.1 The present practice of relying upon detailed
regulation of every process and enterprise
to achieve policy ends has to cease. Policy
makers need to accept the principle of
regulation by market forces. This includes all
pricing activities by infrastructure operators.
2.2 It follows therefore that infrastructure must
be created in sufficient quantity to allow the
functioning of an effective market. This means
that users must have real choice between
modes and between suppliers in one mode.
This probably means that there has to be
an effective planning process to provide
infrastructure in advance of anticipated
demand.
2.3 It has to be acknowledged by policy makers
that the logistics industry is interlinked across
all modes. No one mode or hub can operate
in isolation and those solutions that do not
recognize these essential features of the
industry will deliver sub-optional solutions.
2.4 The logistics industry is now an essential
element within the manufacturing industry.
A competitive and effective manufacturing
industry will not emerge unless it is supported
by effective logistics.
2.5 The organization of government ministers
must recognize the interlinked nature of
all logistics sectors and the essential links
to manufacturing. The present structure
of separate ministries operating without
coordination will not deliver effective
solutions.
2.6 It must be recognized that ‘infrastructure’ is as
much a matter of the legislative infrastructure
as it is about the provision of physical
infrastructure. The processes, procedures
and values governing the operation of

LOGISTICS
infrastructure may be the difference between
effective and inefficient infrastructure, and can
drive capacity enhancement.
2.7 The legislative structure governing the
logistics industry contains several outdated
regulations that are inappropriate to modern
transport methods. These have to be updated
and / or removed altogether.
2.8 As far as possible, all elements of the logistics
industry should be privatized.
2.9 Such legislation as may be necessary has to
be applied uniformly across the country. The
practice of allowing significant local variations
on a theme that should be common is a
significant impediment to an effective logistics
industry.
2.10 The role of customs and its interaction with the
logistics industry needs fundamental review
to make it a trade facilitator rather than an
inhibiter which it is now.
2.11 Across all modes, economies of scale are a
paramount consideration, Logistics planning
must recognize this.
2.12 India must develop transport hubs,
particularly in the container shipping and air
transport sectors. Such hubs have to have the
appropriate legislative infrastructure as well as
the physical infrastructure.
2.13 The rules governing the interaction between
government and infrastructure operators, the
so-called PPP (public private partnership)
model needs review to reduce the balance of
risk and reward which is currently significantly
skewed in favour of the government.
2.14 The planning process is over centralized and
does not enable coordinated industry input
and participation in implementation which
itself must allow greater flexibility.
2.15 There are serious skills shortages across the
sector.
2.16 Implement goods and services tax (GST)
uniformly across the country to facilitate
national Inland distribution networks.
2.17 Safety must be enhanced across the
sector. At present, this falls short in terms
of regulation and management attention. It
is unfortunate that transport is delivered at
such human cost.
3. ROAD TRANSPORT
• The standard and extent of roads capable
of supporting road freight transport remains
poor.
• There remains a multiplicity of toll taxes which
add delays, cost and unpredictability.
• State taxes and their application differ widely
geographically and across commodities.
• Truck permit regimes differ between states
which prevents the development of effective
national distribution.
• There is no formal training of drivers and
attendants.
• Safety standards are low and there are very
few organized training programmes.
• International best practices of route
optimization and freight management through
the use of multiple trailers for single horse
(i.e. tractor) are prevented in India due to
archaic interpretations of the Motor Vehicles
Act. Further, the interpretations of this act as
it applies to allowing for multiple trailer single
horse (MTSH) type operations differ from state
to state depending on the interpretation of
the specific state’s Regional Transport Office
(RTO).A nationwide circular to all RTOs to
allow separate registration of tractors and
trailers is recommended. Develop well defined
laws that differentiate between the legal
obligation of the tractor owner and the trailer
owner while goods are in transit. These laws
should be national in scope and not left to the
interpretation of RTOs or individual states.
• Multiplicity of regulations applicable to
truck movement in India coupled with
random inspections on the road by different
agencies responsible for implementing these
regulations lead to multiple stoppages. Such
stoppages, including those at checkpoints
and entry-points, could add up to as much
as 10 to 14 hours per day for trucks in transit.
It is suggested that tax related check-posts
are done away with in the post GST regime

EBG FEDERATION
and replaced with risk-management based
flying squads for random inspections. The
registration of information for intra-state
movement is done through an automated
system. All stops made by flying squads
would have to be registered by the officials,
and physical inspections if any, be undertaken
on camera. All RTO inspections should also be
made on-camera and all stoppages registered
online by officers and made s.t. RTI Act.
• Road weight legislation has to be enforced
nationally.
• Above all, implement GST to facilitate the
development of proper national distribution
networks to replace the patchwork of regional
structures.
4. AIR FREIGHT TRANSPORT
• There is urgent need to implement
comprehensive e-governance systems across
the industry, supported by a robust EDI
(electronic data interchange) customs system
with adequate back-ups.
• Implementations of cargo community system
at all airports and terminals capable of working
without manual intervention.
• Landing and navigation charges remain high
thus adding to India’s high logistics costs.
• Sea-air, road-air freight development has been
extremely limited.
• 24x7 availability of key officials.
• Best practice sharing between airports need
to be adopted.
• Royalties and service tax on all airport services
is making air freight unnecessarily expensive.
• The processes for part shipment of imports is
a major issue and amendment processes take
days.
• Excess and over-carried cargo is an integral
part of the business but, the process of
regularisation is too slow.
• Allow establishment of cargo ‘villages’ to
allow build-up and handling of ULDs (unit
load devices) and pallets as per international
practice.
5. CONTAINER SHIPPING
• The development of port user community
systems in all ports to serve all users and
stakeholders is essential. These exist in almost
every port in competitive markets and greatly
facilitate the handling of transactions.
• The current rail pricing structure for containers
remains an impediment. Railways must be
able to compete effectively and reverse the
disastrous transfer of cargo to road.
• The movement of containers across state
boundaries must be liberalized in all respects
particularly tax, where, a uniform GST is
essential. Without this, inland markets cannot
develop and compete properly.
• The current arrangement of interstate check-
points needs to be done away with.
• Port productivity and connectivity still needs
improvement.
• The cabotage issue remains unresolved
despite recent initiatives.
6. PORTS AND TERMINAL
SERVICES
• The paucity of inland connectivity for many
ports remain an issue.
• Dedicated freight corridor networks with
attendant double stacking need swift
expansion.
• The cabotage issue needs resolution.
• Port connectivity systems are needed in all
ports.
• Leave pricing to market forces not regulation.
• Uniform application of customs rules both
across ports and inland facilities.
• Ports to move nationally to landlord and
concessionaire arrangements under equitable
PPP structures.
7. EXPRESS LOGISTICS
• Ensuring appropriate space is set aside for
dedicated and exclusive express handling
facility for express operators in the airport

LOGISTICS
premises with city and airside access for
express operators with own aircraft. Such
space needs to take into consideration
the unique needs of express, and thus be
located next to aircraft parking and transit
bays. Additional features required by express
operators, especially if India is to develop an
express logistics regional hub, are:
• Self-ground handling for express companies
with own aircraft.
• Customs is encouraged to give custodianship
to express operators. Custodianship for
express operator is essential for seamless
operations leading to speed and security of
operations.
• Simplification of trans-shipment procedures.
• Allowing export commercial shipments to use
courier by
• integrating an export module in the courier
EDI currently jointly being developed in
PPP mode by Express Industry Council of
India (EICI) and CBEC and
• in the interim customs can issue a circular
clarifying the carriage of commercial
exports up to Rs.25, 000 (€377) on the
existing courier shipping bill.
8. TRADE FACILITATION
• The logistics industry appreciates the recent
initiatives towards developing an effective
single-window and a single-common online
declaration for customs and all allied agencies.
It looks forward to further systemic reforms that
would ensure zero downtime of the customs
EDI and a paperless system that accepts
scanned electronic copies of all documents
required for clearance with digital signature.
In addition, some other expectations of the
logistics sector include:
• Inclusion of a wide category of entities
[ACP-, AEOs (authorised economic
operators), star trading houses, and large
manufacturers) for the benefit of deferred
duty payment (DDP) scheme announced
by Finance Minister Arun Jaitley in his
budget speech. Limiting this to just AEO
and ACP category (even a reformed
AEO category) would be self-defeating,
and become a tool in the hands of a
few ‘AEO’ freight forwarders to develop
their business. The obvious implications
for rent-seeking and favours that would
perpetuate the AEO programme would
defeat the entire purpose of transparency.
India’s large manufacturers who are
responsible members of global supply
chains should be allowed to have this
facility as a matter of course, whether or
not they get AEO status or not
• Delays happen at assessment level where
the counter signature of the assistant/
deputy commissioner (AC/DC) is required
due to assessable value being greater then
INR 1 lakh (€1,325). This delay is again due
to the shortage of officers and the multiple
tasks expected to be done by the AC/
DC. It has been industry’s long standing
demand that the limits be re-defined
in light of the fact that the purchasing
power value of INR 1 lakh has declined
substantially from the time this limit was
first promulgated. The AC/DC signature
requirement should be applicable only to
shipments with assessable value greater
than Rs.5 lakh (€6,626).

EBG OFFICES
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Okhla | New Delhi – 110 020
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MUMBAI
C/o Fuchs Lubricants (India) Pvt. Ltd.
Sarjan Plaza, 2nd Floor | 100, Dr. Annie Besant Road
Worli | Mumbai – 400 018
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C/o IIRA
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Bangalore – 560 001
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CHENNAI
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Ground Floor | Prestige Polygon | 471 Anna Salai, Nandanam
Chennai – 600 035
Tel: +91 44 4393 1602 | Email:chennai@ebgindia.com

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BMR Advisors is a professional services firm offering a range of Tax, Risk and M&A
advisory services for domestic and global business of all sizes.
The firm enhances value for clients by focusing on solutions that are innovative, yet
practical and that can be implemented. This is achieved by blending domain expertise
with analytical rigour, while maintaining an uncompromising focus on quality, and by
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The respect that the firm commands is evident from the fact that it is consistently rated
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A team of over 600 professionals has extensive functional and industry expertise across
service areas, and is well-equipped to deliver world-class services to our clients.

OFFICE LOCATIONS
GURGAON
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DLF Phase III, Gurgaon 122002
T +91 124 669 5100 | F +91 124 669 5001
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T +91 22 6135 7000 | F +91 22 6135 7070
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T +91 80 4032 0000 | F +91 80 4032 0001
CHENNAI
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New Airport Road, Viman Nagar, Pune 411014
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