The passing of the Airport Economic Regulatory Authority bill by both houses of the Indian Parliament is a step in the right direction but more urgent action on taxation is still needed.

"AERA has an important role to play. Now that the parliament has approved, there is no time to waste in quickly setting-up and staffing the agency," said Giovanni Bisignani, IATA's Director General and CEO.

AERA's role is to ensure that India's aviation infrastructure meets cost-efficiency and service-level targets with charging policies in line with ICAO principles. "Timing is critical. First, the industry crisis makes cost-efficiency throughout the value chain more important than ever. And second, the increased role of private-public partnerships for infrastructure developments requires both solid ground rules and the ability to enforce them," said Bisignani.

"ICAO principles call for transparency, non-discrimination and user-consultation. Even though India has a seat on the ICAO Council, today many of these principles are being ignored back in Delhi. There is a big gap to cover with little or no transparency in charges and differential pricing practices. Our best estimate is that the air navigation service provider over-collects by 20%. And the 33% price differential for international landings has no cost justification," said Bisignani.

Bisignani also reiterated the need for reasonable taxation in India.

"The global crisis in aviation is deepening. India is one of the epicenters with potential losses of US$1.5 billion this year. AERA is a step in the right direction, but it is only part of the solution. To help reverse the state of the Indian air transport sector, we need a comprehensive policy approach in addition to establishing AERA. The most urgent is to address taxation, which is crippling the industry," said Bisignani.

"The service tax on premium class tickets, air navigation charges, and landing & parking charges is contrary to ICAO's resolution calling for a reduction of taxes.  Taxing overflight charges also breaches India's international obligations," said Bisignani.

"We welcome and commend the Ministry of Finance for scrapping the 5% import duty on fuel, and hope the Ministry will quickly address all the other taxation issues, including the 8% excise duty.  State governments must also understand that the situation is desperate, and deliver a fair solution on the excessive sales tax, which is as high as 30%. If not, they will need to share responsibility for the broader economic consequences of a failing industry," said Bisignani.