On their part, the airlines are expected to pass on this burden to consumers, resulting in an increase in fares.
The biggest hit comes from the proposed tax on aircraft leasing charges: the projected additional burden on airlines is expected to be about Rs 250-300 crore (Rs 2.5-Rs3 billion).
As they rely exclusively on leased aircraft, existing and proposed Indian low-cost carriers are likely to go belly up as their operational costs will spiral.
It is expected that most of the proposed no-frills carrier launch plans are likely to go off schedule. State-owned carriers Air-India and Indian Airlines will have an additional burden of Rs 86 crore (Rs 860 million) and Rs 91 crore (Rs 910 million), respectively, as a result of the tax on leasing charges.
The private airlines are also expected to be hit to the same extent.
Another area of concern for the aviation sector is the service tax on airport services. Airports Authority of India will have an additional tax burden of Rs 220 crore (Rs 2.2 billion), while Air-India and Indian Airlines will have to pay Rs 35 crore (Rs 350 million) and Rs 28 crore (Rs 280 million), respectively, as service tax.
The private airlines are expected to pay about Rs 40 crore (Rs 400 million) under the service tax head.
Meanwhile, domestic airlines have formed an informal alliance to press the government for a complete rollback of the Budget proposals. The airline representatives met Chidambaram on Friday to explain their stand.
The additional cost on leasing will negatively impact the plans of both Air India and Indian Airlines to add new routes. The government plans allow Indian Airlines to fly on more international routes, and also expand capacity on its existing routes.
Besides, the government is also likely to bring down the age of aircraft, to be bought or leased by an Indian airline, to seven years from the present 15 years.
This will also add the cost of taking aircraft on lease, as the newer aircraft will be more expensive. This will also mean that airlines, such as Indian Airlines, will have to replace some of the old aircraft in its fleet with newer ones.
Meanwhile, Civil Aviation Minister Praful Patel said he was concerned about the impact of the Budget on the domestic aviation sector and it will be taken up with the finance minster.
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