Aviation minister to talk to states on jet fuel tax

Taxes on ATF in India are among world's highest, and are seen as key reason for mounting losses of airlines

Renewing efforts to urge state governments to rationalise taxes on jet fuel and resolve issues hindering the growth of aviation in the country, Civil Aviation Minister Ashok Gajapati Raju Pusapati is looking at visiting and holding consultations with two states every month.

Raju plans to visit all 29 states over the next year starting with Goa, Tamil Nadu and Kerala in September. In October, the minister has meetings scheduled with civil aviation authorities in Maharashtra.

A senior official in the ministry of civil aviation said, “The minister has decided to reach out to states to discuss and resolves issues pertaining to air connectivity, infrastructure development and rationalisation of taxes on aviation turbine fuel (ATF). We will go to their doorstep and make all efforts to catalyse growth of the civil aviation sector.”

Taxes on ATF in India are among the highest in the world and are considered to be one of the major reasons for the mounting losses of local airlines. Fuel costs account for as much as 50 per cent of the operational expenses of an airline in India. The value-added tax (VAT) on ATF ranges from 4 per cent to 30 per cent, depending on the sales tax levied by a state.

“We are asking that state taxes be rationalised and a uniform rate of 4 per cent levied on jet fuel. However, this requires consultation with states, which will have to do without the revenue they get through the sale of ATF,” added the ministry official. In fact, Andhra Pradesh Chief Minister Chandrababu Naidu recently reduced sales tax on ATF after holding a meeting with top airline executives and Union civil aviation ministry officials in New Delhi late last month.

Naidu also assured industry stakeholders that he would draw up a comprehensive aviation policy which would take into account their interests for the next 15 years. After the announcement, IndiGo said it would commence six new flights from Visakhapatnam on October 10. Dubai-based Emirates showed interest in setting up ‘operation models’ in Andhra Pradesh.

In accordance with the initiative proposed now, every month, a high-level delegation from the civil aviation ministry, which may include the chairmen of the Airports Authority of India (AAI) and Air India, will meet civil aviation authorities and chambers of commerce at the state level to resolve issues related to the growth of the sector. The teams will review operations at all major airports in the country and examine whether these are meeting service standards.