In their pre-budget expectations, they also asked the government to assess the option of developing unused airstrips located in various parts of the country to boost air connectivity.
In a statement, ASSOCHAM President Rana Kapoor said, "Most new airports can be developed on the no-frill model which will have a multiplier effect on exports, trade, travel, tourism and other allied industries.
Countries like Malaysia, the UK and France have already successfully tested this model of infrastructure development."
He suggested leaner construction design for developing new airports without compromising on quality and safety and rationalised airport charges for no-frill airports.
Kapoor said such steps would "significantly boost private sector interest in airport development and enable the concept of no-frill airports to take off".
CII National Committee on Civil Aviation and Executive Director of Bird Group, Ankur Bhatia, said the new government must address fundamental challenges like rising costs of aviation fuel, high interest payments, insufficient infrastructure and shortage of skilled and trained manpower.
A strong focus on regional infrastructure and connectivity would also help bringing in investments from foreign airlines, for generating employment and stimulate overall growth of the industry, Bhatia said.
Consultancy firm KPMG also suggested several sops for the aviation industry, including notification of jet fuel as a "declared good" to have a uniform levy of four per cent across the country.
It also urged the government to allow private airport operators to issue tax free infrastructure bonds to the public with income tax exemption, providing a 10-year tax holiday (covering Customs, Excise and Service Tax) to aerospace manufacturing and MRO (maintenance, repair and overhaul) sector and allocation of Rs 500 crore for modernising air navigation services.