After effecting a string of reforms to help the ailing Indian civil aviation sector, Civil Aviation Minister Ajit Singh has said he is hopeful that high jet fuel cost and passenger fares will come down as and when government places aviation turbine fuel (ATF) on the notified product list, which will cut down upon the state sales tax levied on the fuel.
“I am hopeful that the ATF can be brought in the (notified product) list. The ministry has already taken up the issue with other ministries and has also held discussions on the issue”, said Mr. Singh.
“Hopefully we may get it through. On the other hand, I have urged the state chief ministers to voluntarily reduce state tax on the ATF to encourage more airlines to fly to their cities and offer reasonable fares on the routes which is sustainable for them and the passengers”, he added.
The reform measure will not only help airlines to save on cost, it will also augment passenger traffic, as domestic carriers will then have an ability to bring down fares on a competitive basis.
Fuel prices which comprise about 50 percent of the operating costs of airlines in India, has dented the sector, as major airlines bleed under the high state-sales-tax regime. Fares are also increased from time to time on the ground of soaring fuel prices.
Once listed as a notified product or a declared good under the Central Sales Tax (CST) Act, airlines will only have to pay a uniform sales tax of four percent. The Oil Ministry’s regulator will then be in a position to keep a check on prices.
It’s hard to calculate exactly to what extent the prices will come down as the states levy different rates of sales tax, but industry insiders say this will be “considerable”.
“High ATF prices on some sectors due to state sales tax render that route unprofitable. Sometimes we are even not able to recover our fuel cost of operating that flight, leave alone giving cheaper fares. Sometimes even pilots are advised not to refuel from some particular airports which have extremely high charges”, a senior airline official told IANS on condition of anonymity.
Currently, ATF sold in the country is nearly 50-60 per cent costlier than in overseas markets like Bangkok, Singapore or Dubai as an additional 4-34 per cent state sales tax hikes the prices.
There has been a long standing political perception that ATF, which is a super-refined form of kerosene, should not be subsidised for air travel. The government currently subsidises sensitive products like diesel, LPG cylinders and kerosene.
Recently, the Union Cabinet has decided to set up an inter-ministerial group to fine tune a policy to develop the country’s airports and other facilities as aviation hubs. Easing of ATF prices is said to be a major component of its purview.
The group will also look at easing the differences raised by other ministries on the ATF price issue, which the Civil Aviation Ministry has described as “road block for development of aviation hubs”.
