Cut in ATF prices dashes dreams of aviation firms

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: Major airline operators are not happy with the finance minister's announcement to cut sales tax on aviation turbine fuel for only smaller aircraft with minimum takeoff mass of less than 40,000 kilograms operated by the scheduled airlines. The airline industry had earlier hoped that aviation fuel altogether should be given a declared goods status, which would attract a uniform 4% sales tax across India.

Major beneficiaries of the tax cut would be Air Sahara and Paramount Airways. Air Sahara has seven bombardier CRJ aircraft which fits the criteria, while Paramount Airways fleet includes one Brazilian Embraer aircraft. Also, corporate houses like Reliance and the Singhanias who own business jets would also be benefited from the announcement.

Says Jeh Wadia, managing director, GoAir, "The sales tax on fuel, which is now a declared goods for smaller aircraft below the weight of 40,000 kilogrammes will only benefit a very small percentage of fliers. We hope that this will be further reviewed to be extended to aircraft above 40,000 kilogramme since low cost carriers predominantly have aircraft above 40,000 kilogramme. This will further sustain low fare carriers, enabling them to even further reduce fares."

Industry analysts say that ATF prices in India are 60% higher than the average fuel prices worldwide. The sales tax on ATF varies between 26% and 30% from state to state. Besides, there is an 8% excise duty on ATF in India. The industry incurs loses to the tune to Rs 2,000 crore each year, due to the high tax structure. A 10% drop in ATF prices could have brought about a 4% cut in airfares.