With dozens of flights cancellations across the country, industry body ASSOCHAM today called for low taxes on jet fuel, liberal foreign investment norms and a new civil aviation policy which are in tune with current global and domestic realities.

The aviation industry has all ingredients to grow but airlines are facing huge losses as over one-third of operating costs are on account of aviation turbine fuel which is heavily taxed, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

As the key infrastructure sector expands to keep up with booming passenger and cargo traffic, investments of Rs. 1.5 lakh crore will be required in the next 15 years. But major private and government-owned airlines like Air India, Jet Airways, Kingfisher Airlines and SpiceJet have flown into debt turbulence due to elevated fuel costs and fierce price wars.

"Airlines could suffer losses worth about Rs. 15,000 crore in the current financial year with Air India alone likely to account for more than half of it," said ASSOCHAM secretary general D.S. Rawat.

Airlines need fresh funds and there will be a question mark on their survival if they are unable to raise them, he said. Rising crude oil prices, depreciating rupee and cut-throat competition have eroded airlines' ability to raise fares despite passenger growth of about 19 per cent this year.

The government allows foreign investment of up to 49 per cent in Indian carriers. However, foreign airlines are not allowed to invest directly or indirectly in domestic carriers, a rule the government should scrap for healthy growth of civil aviation sector, said Mr Rawat.

Airport charges must come down and ground handling operations need to be streamlined. Maintenance, repair and overhaul (MRO) facilities are subject to 10.3 per cent service tax. There is no import duty for foreign MRO companies from overseas suppliers but domestic players have to pay import duty of 30 to 40 per cent.

In addition, there is 18.5 per cent minimum alternate tax on aerospace special economic zones which are coming up at Nagpur, Belgaum and Hyderabad.

Passenger traffic totalled 14.2 crore in 2010-11 which is growing by a conservative growth rate of ten per cent. The throughput is expected to be 54 crore passengers by 2025. At the same time, cargo traffic is expected to touch 90 lakh tonnes from 24 lakh tonnes in the last financial year.

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