"In deference to the request from Air India and Indian Airlines, I propose to extend up to September 30, 2005, the exemption from tax on agreements to acquire aircraft or aircraft engines on lease", Finance Minister P Chidambaram said.

The budget proposal makes it clear that the exemption for lease payments would "continue with regard to agreements entered into on or before September 30, 2005".

"However, the benefit of exemption from tax will be available in respect of lease payments made in pursuance of agreements entered on or after October 1, 2005", the explanatory memorandum on the Finance Bill said.

The WHT has been a major bone of contention for many airlines, including several private carriers planning to launch operations in the near future, as they felt that the high WHT rate would lead to an additional burden on them while leasing aircraft or aircraft engines from foreign leasing firms.

In the Budget, the Finance Minister enhanced allocation to the Civil Aviation Ministry by about 62 per cent -- from Rs 1473.03 crore (Rs 14.73 billion) last fiscal to Rs 2379.32 crore (Rs 23.79 billion).

The allocation for Indian Airlines in the current fiscal has been increased by almost four times -- from Rs 215.62 crore (Rs 2.15 billion) in the last fiscal to Rs 911.73 crore (Rs 9.11 billion).

Official sources said the substantial increase in allocation would go a long way to meet the expenditure on acquiring of 43 new aircraft, the price negotiations for which are now in advance stages.

The Budget also saw quantum jump from Rs 12 crore (Rs 120 million) last fiscal to Rs 333.92 crore (Rs 3.33 billion) this year in total allocation on several heads, including payment of margin money for Indian Airlines' fleet augmentation programme and a token provision for equity payment to Air India linked with aircraft acquisition.

This head of allocation on public enterprises also included expenditure on Airports Authority of India plans to upgrade Amritsar Airport and providing operational improvement in various airports in the North Eastern region including Sikkim and crucial areas like Jammu and Kashmir, Leh and Lakshadweep.

The allocation of Air India was also enhanced from Rs 461.1 crore (Rs 4. 61 billion) in 2004-05 to Rs 468.74 crore (Rs 4.68 billion), while that for the

Airports Authority of India, which is in the process of modernising several airports, from Rs 701.71 crore (Rs 7.01 billion) to Rs 892.3 crore (Rs 8.92 billion).

For Pawan Hans Helicopters Corporation, it was raised from Rs 75.6 crore (Rs 756 million) to Rs 90.7 crore (Rs 907 million).

The lumpsum provision for aviation projects and schemes in the Northeast including Sikkim has also been hiked from Rs 377 crore (Rs 3.77 billion) to Rs 633.5 crore (Rs 6. 33 billion).