Stating that the aviation industry was reeling under the impact of the rupee slide and rising crude oil prices, the Civil Aviation Ministry on Friday said it would continue to impress upon the State Governments to reduce taxes on aviation turbine fuel (ATF) to provide relief to the cash-strapped airlines.
A large number of industry leaders and experts expressed concern over the rising cost of operations of the airline industry, but warned the industry against indulging in price water as such a move could impact their financial bottomline.
``The rise in ATF prices will have an impact. We have been requesting the state governments to consider reduction in taxes they levy on ATF, keeping in mind the rising oil prices. While the governments of Jharkhand, Chhattisgarh, West Bengal, Rajasthan and Madhya Pradesh have reduced taxes on jet fuel, we are pursuing other states to follow suit and are assuring increased air connectivity if they did,’’ Civil Aviation Secretary K.N. Shrivastava said on the sidelines of an ASSOCHAM conference on aviation here.
Mr. Shrivastava was also concerned over the possibility of a hike in air fares, saying there has been reasonableness in fares. The slide in the rupee rate vis-a-vis the US dollar would also adversely impact the costs of airlines as a major chunk of their costs, including those emanating from aircraft lease rentals, external commercial borrowings, maintenance, spares, payments to expat crew and staff costs abroad, were linked to the dollar.
He said he was not indicating any fare hike but the airline business has to be sustainable. Major consultancy firm Deloitte's senior director Amrit Pandurangi said he expected airlines' fuel cost, which is now between 35 and 40 per cent of the total cost, to go up by another five per cent. However, he said, he did not expect any major rise in domestic fares due to heightened competition and growing air traffic, but indicated that international air fares, especially for the business travellers, could experience small upward adjustments.
Mr. Pandurangi asked the airlines to be sensible before starting a price wa.
Most airline operators in India have been recording losses for the last three years due to the spiralling cost of ATF, global economic slowdown, low yield due to intense competition and consequent widening gap between revenue and expenses and depreciation of rupee. Over the years, the operational costs for the airlines have gone up mainly due to increase in fuel prices and depreciation of the rupee.
Further, the airport charges meant for navigation, landing and parking have also gone up for some major airports, which constitute 10-12 per cent of their cost of operations.