Civil aviation minister Praful Patel has made a strong case for giving aviation turbine fuel (ATF) declared goods status in a meeting with the Prime Minister and the finance minister.

According to sources, the Prime Minister is ?very much in favour? of making ATF a declared good, and thereby attracting a sales tax of 3% but since ATF is a state subject, the states would first have to agree to it.

?The empowered committee of state finance ministers will meet on June 16 and the issue of reducing sales tax on ATF is one of the main issues to come up in the meeting,? Patel said in a media briefing after the meeting. The state ministers are expected to agree to a reduction in the sales tax levied on ATF, sources in the ministry said. ?But we have to wait till the meeting to find out, the source added.

Civil aviation ministry representatives had made a presentation to the empowered committee of state finance ministers in their last meeting held in Kerala in April asking them to favourably look into reducing the state levies on ATF. Civil aviation ministry officials had said the high cost of the fuel was causing serious problems to the aviation sectors. In India, ATF constitutes 40% of the operating costs of airlines and the price of the fuel itself is 60% higher in the country as compared to the rest of the world. For most foreign airlines, ATF constitutes a little more than 20% of their operating costs but this is rising with the rise in fuel costs.

Apart from the Prime Minister and the finance minister, Planning Commission deputy chairman Montek Singh Ahluwalia and other officials from the Prime Minister?s Office, the finance ministry and the Planning Commission attended the meeting.

In the meeting, Patel also informed the Prime Minister that due to the cascading and multiplier effect of the high ATF costs, the airlines were being forced to prune and rationalise routes, which is wreaking havoc for the industry as a whole. ?The Prime Minister himself has referred to the sector as a sunrise sector in the country and agrees that the sector?s bad financial health is not good for the country and something has to be done,? Patel said.

Patel also informed of the fares charged by the airlines that were making things worse for them. ?While fares have fallen from the average Rs 6,000 to Rs 3,950 over the past few years, the cost of ATF has risen from Rs 21,000 in 2002 to Rs 70,000 now,? Patel said.