Centre asks state govts to reduce tax on ATF

Jet fuel prices high due to rising base price, very high VAT imposed by states

The central government today asked state governments to reduce value added tax (VAT) on jet fuel to 4% to support the cash-strapped airline industry.

It also wanted the states to take steps like reducing property tax on airports, provision of security, power and water supply and road connectivity, to encourage development of air traffic in tier-II and III cities and in remote areas.

Representatives of state governments wanted the Centre to share the cost of developing airports in Tier-II and III cities and ensure a minimum number of flights to non- metro and remote destinations, among other things.

Civil Aviation Minister Ajit Singh said a major reason for airlines losses is the high cost of ATF. Jet fuel prices are high due to rising base price and "very high VAT imposed by state governments", which currently ranged from 4 to 30%, he said.

Lowering of VAT on ATF by Chhattisgarh has led to "a six -fold increase in ATF uplift" and brought in more flights to Raipur. "So my request to you all will be that you should take up with your government to reduce VAT on ATF to four%" which would also lead more people to take to air travel and provide considerable spinoffs to the economy, Singh said.

On airport development in tier-II and III cities, Singh said the government has decided to operate, manage and develop 20 airports across the country, including Chennai and Kolkata, through public-private partnership. While Requests for Qualification (RFQs) for Chennai and Lucknow have already been issued, RFQs for Kolkata, Jaipur, Ahmedabad and Guwahati "are in the process and will be out this week," Singh said.

Andaman & Nicobar Island's Lt Governor A K Singh asked the Centre to ensure more flights to the islands, saying despite zero VAT on jet fuel, one-way air ticket prices in peak seasons went over Rs 25,000.

Kerala and Karnataka governments urged the Centre to share the costs of developing airports, with the former also asking airlines to assure that reduction in VAT would lead to a decline in airfares.

Officials from states like West Bengal and some Northeastern states sought night-landing facilities, while Jharkhand government suggested waiving night-parking for non-scheduled operators. The representative of Uttar Pradesh government wanted the Centre to make flying rules more realistic and user friendly.