New Delhi: India must make "substantial" investments in expeditious upgradation of its civil aviation infrastructure in order to face major competition from China, Japan, South East and West Asian nations, a high-power Government committee said today (Nov 2, 2004).

The Naresh Chandra committee, which submitted the second and final part of its report to civil aviation Minister Praful Patel in New Delhi, also recommended enacting of a Civil Aviation Security Act to delineate steps for improved coordination among various agencies involved in aviation security and streamlining of procedures for faster immigration and customs clearance.

"Definitely, by the end of this year, the new Civil Aviation Policy (CAP) will be ready. With the Naresh Chandra Committee submitting its entire report, we are now fully in a position to have the policy," Patel told reporters after he was presented the second part of the report by Chandra.

He said the policy, to be prepared after thorough discussion with the panel members and others concerned, would be the basis for the growth of the entire sector.

"We are now poised for a double-digit growth with more international and domestic travellers and airlines operating on our skies".

Replying to questions, Chandra said at a time when the countries of Southeast Asia, China, Japan and the Gulf are talking of expanding their fleet by the hundreds, "We only have about a hundred aircraft in India, if you want to be a serious player, you need more aircraft and that too, expeditiously".

Chandra, who headed the five-member committee, said the recent upswing in the Civil Aviation Sector worldwide had led various Governments and airlines to finalise plans for massive upgradation in their infrastructure and fleet.

"A bold and pragmatic approach by all the concerned interests in India is essential to withstand this competition. The Committee sees no reason why the Indian civil aviation system cannot be among the best in Asia", he said.

It also noted that while infrastructure at present was a limiting factor, lack of capacity to and from India was yet another major constraint.

In order to ameliorate this condition, the Committee asked the Government to expedite liberalisation of air transport services, beginning with allowing domestic airlines to utilise the unused bilateral entitlements, especially on high-traffic destinations.

Asked whether the Government planned to do away with the withholding tax on rentals on leased aircraft as suggested by the Committee, Patel said, "We have already postponed by a year the withdrawal of exemption granted to airlines from paying the withholding tax on leasing aircraft from foreign firms".

The Civil Aviation Ministry would hold discussions with the Finance Ministry in regard to the recommendation and "our view will be that this withholding tax should not be introduced at all".

The withholding tax works out to over 30 per cent of the rentals for each aircraft leased from foreign firms.