Syed Tamjeed Rakhee Biswas March 15 2023 Aviation in India 2022: economy Spaviatech Law | Aviation - India Syed Tamjeed, Rakhee Biswas Aviation Budget 2022Import, export and procurement of aircraftTax reformsAircraft financing and leasingResearch and innovation2022 witnessed significant milestones in the aviation industry. This article, part of a series explaining the industry's 2022 developments, focuses on economy-related updates relevant to the industry.Budget 2022The 2022 Budget witnessed the Civil Aviation Ministry receive an allotment of 107 billion rupees (approximately $1.3 billion). This amount, however, included 6 billion rupees (approximately $72 million) that was specifically allotted for the regional connectivity scheme. The Airport Authority of India was allocated 1.5 billion rupees (approximately $18 million), while Air India Asset Holdings Limited, the designated special purpose vehicle for Air India's financial restructuring, loans and debts, received approximately 93 billion rupees (approximately $1.2 billion). Similarly, 1.65 billion rupees (approximately $22 million) was set aside for medical benefits for retired Air India employees.Import, export and procurement of aircraftThe Ministry of Commerce and Industry issued the Special Economic Zones (Fourth Amendment) Rules 2022. These rules detail the procedures for importing, exporting or procuring from or supplying to the domestic tariff area of aircraft by lessors that have set up a unit in an international financial services centre (IFSC). The rules provide much-needed clarity on customs-related formalities, especially pertaining to the supply of aircraft on lease, or from an IFSC.Tax reformsOn 16 June 2022, the Ministry of Finance issued a gazette notification detailing that Indian operators leasing aircraft from aircraft lessors based in an IFSC were exempt from deducting income tax on lease rent or supplemental lease rent. This came with a proviso that certain regulatory filings were to be made by the lessor and the lessee to the tax authorities. The gazette notification was effective from 1 July 2022.Aircraft financing and leasingEarly in 2022, the International Financial Services Centres Authority requested the Reserve Bank of India to include aircraft leasing as a financial service. The Banking Regulations Act does not recognise this activity; amendments must be brought in to fill gaps in the ecosystem. While the Gujarat International Finance Tec-City offers a potential launchpad to boost the industry's activity, the lack of funding to potential players by Indian banks still presents an obstacle.Research and innovation2022 also witnessed a memorandum of understanding (MoU) signed between Air India, AirAsia, Vistara airlines and the Council of Scientific And Industrial Research – Indian Institute of Petroleum (CSIR-IIP). This follows other similar initiatives, including Indigo's 2021 MoU with CSIR-IIP for research surrounding the same fuel category. The MoU sets out a collaborative approach, showing the parties' joint intention to work to improve the research and development (R&D) and deployment of sustainable aviation fuels. The parties have also indicated that they will specifically focus on R&D surrounding single reactor hydroprocessed esters and fatty acid technology for drop-in liquid sustainable aviation and automotive fuels.For further information on this topic please contact Syed Tamjeed Ahmad or Rakhee Biswas at Spaviatech Law by telephone (+55 21 2276 6200) or email ([email protected] or [email protected]). The Spaviatech Law website can be accessed at www.spaviatechlaw.com.Endnotes(1) For earlier articles in this series, see:"Aviation in India 2022: general updates";"Aviation in India 2022: legal updates"; "Aviation in India 2022: policy updates"; and"Aviation in India 2022: notifications, directions and other issues".