Global agency Airports Council International (ACI) Asia-Pacific (APAC) has “called on” India not to reduce the existing per passenger duty-free liquor allowance of two litres and one carton of cigarettes.Hong Kong-based ACI APAC has said “Indian airports have tremendous growth potential in terms of duty-free and travel retail. Wine and spirits are the top duty-free segment in India.
According to the 2018 World Air Traffic Report published by ACI, passenger traffic in India will grow by 6.1% every year until 2040. Within an unconstrained scenario, it is forecasted that the spending in duty-free and travel retail will grow 20% to $2.1 billion in 2022,” it said in a statement on Thursday.It has termed commerce ministry’s proposal to halve the liquor allowance “inconsistent with the government’s fruitful efforts to date to incentivise private capital in the public sector and will damage the growth trajectory of Indian airports and duty-free providers.”
“We urge the authorities to reject this proposal. Not only is it inconsistent with the latest attempts by the government to incentivise private capital to invest in the airport industry but it undermines the growth opportunity for Indian airports and duty-free providers who are a driving force in the local airport economy. Duty-free operators must be able to count on the expansion of airport infrastructure along with new retail space and a regulatory framework that incentivises the market to grow. Unfortunately, the ministry’s proposal will limit this objective if airports cannot generate non-aeronautical revenues to cover aeronautical cost,” said Stefano Baronci, director-general of ACI Asia-Pacific.
“The latest airport privatisation processes carry significant capital expenditure risk on the part of investors, requiring them to diversify and increase non-aeronautical revenue streams. The latest privatisation bids were set on the grounds that investors could enjoy full freedom to generate commercial revenues at the airport. The ministry’s proposal to reduce the import of duty-free goods runs the risk of having the opposite effect because it neglects the potential adverse impact it may have on the growth of commercial business,” the ACI statement said.
On Tuesday, the Association of Private Airport Operators (APAO) — whose members are the PPP airports at Delhi, Mumbai, Bengaluru, Hyderabad and Cochin, and greenfield airports coming up in Navi Mumbai and Mopa in Goa — had warned of a revenue loss of Rs 650 crore per annum if the commerce ministry’s proposal to halve liquor allowance from two bottles of one litre each to one bottle is implemented.
APAO said if implemented the move will lead to an additional Rs 200 crore in aeronautical charges (that recovered from passengers in the form of airfares by airlines and user fee by airports) and Airports Authority of India (AAI) will lose revenue share of about Rs 330 crore annually, apart from leading to 8,000-10,000 job losses.It said restrictions on duty free sales will lead to increase in passenger charges, hurt airport industry and may encourage smuggling. The share of liquor imports for duty-free sale is $97 million, against India’s total import bill of $460 billion.