INDIA. Airports Council International (ACI) Asia-Pacific and Asia Pacific Travel Retail Association (APTRA) have both called for a favourable outcome in the wake of proposals to cut the duty free arrivals allowance in India.
As reported, India’s Ministry of Commerce and Industry has proposed halving the existing per-passenger arrivals duty free liquor allowance of two litres, eliminating the current tobacco allowance of 100 sticks of cigarettes and cutting the total value of duty free goods for arriving passengers.
Indian airports and travel retailers will be hit hard. So will retailers selling to India-bound passengers. “It is the arrivals allowance in question – so, yes, it would affect retailers such as Dubai Duty Free,” one leading Indian travel retailer told The Moodie Davitt Report this morning.
[To put that into context, alcohol sales by Dubai Duty Free to departing passengers to India reached around US$68 million last year. Some 40% of the transactions, or 60% of sales by value, included more than one litre -Ed].
In a stirring defence of the status quo, ACI Asia-Pacific said, “The Ministry’s proposal is 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,” said ACI Asia-Pacific Director General Stefano Baronci. “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.
“The latest privatisation bids were set on the grounds that investors could enjoy full freedom to generate commercial revenues at the airport”
“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.”
What’s at stake
Current liquor allowance: Two litres of spirits or wine
Proposal: One litre of spirits or wine
Current tobacco allowance: 100 cigarettes or 25 cigars or 125 gms of tobacco.
Proposal: Allowance eliminated
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, ACI Asia-Pacific pointed out.
“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 association commented.
ACI Asia-Pacific noted that Indian airports have tremendous growth potential in terms of duty free and travel retail. Wines and spirits are the top duty free category in India, it noted. According to the 2018 World Air Traffic Report published by ACI, passenger traffic in India will grow by an average +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 US$2.1 billion in 2022*.”
The Asia Pacific Travel Retail Association (APTRA) added that it is “working closely” with duty free and airport operators in India, as well as the Indian government, to better understand the proposals and come to a favourable outcome.
APTRA President Grant Fleming added: “With concerns also raised from other industry bodies such as ACI Asia-Pacific, the government is actively considering the views raised and this is an important first step in how we hope to reach a resolution.
“The fast-moving dynamics of Asia Pacific mean that regulation changes can spring out of nowhere at incredible speed and APTRA is now gearing up to support our members quickly and robustly in situations like this. Our ambition is to be ahead of the curve and advocacy is a key cornerstone of our mission. We are actively working on the situation in India to support our members, ensuring we all have a voice at the table.”
* Data from Global Data (January 2019) Duty Free Retail Insights – Market Size Asia and Australasia Regions by InterVISTAS analysis.