State Governments are likely to slap a common 12.5% tax on the ATF (aviation turbine fuel) drawn by airlines. This would mean ATF prices would rise at Cochin and Hyderabad airports, while it would come down at Mumbai and Delhi. A consensus on this has emerged as many states, who tried offering a lower tax rate, are annoyed that the tax benevolence was not reciprocated by air fare cuts in that sector.
It is understood that Asim Dasgupta, Chairman, Empowered Committee of States on VAT, is under tremendous pressure from airlines operators to advise paring down of the rates. Their plea is that ATF should be included in the list of declared goods, in view of the Rs 2,000-crore collective losses that the aviation industry is weathering. The centre has been pushing states to reduce ATF prices to make international airlines use India as a refuelling base and therefore a hub for their operations.
However, the mood voiced at the meeting of the panel was that States should stop competing among themselves for better aviation facilities and leave the airline operators to their fate, a State Minister, who attended at the meeting told FE.
Thus the meeting of Empowered Committee has decided that instead of having State-specific ATF rates, the panel would recommend Union Government to have a common ATF rate of 12.5%.
On the assurance of lower air fares, states like Andhra Pradesh and Kerala had trimmed their ATF rates to 4% early this year. Maharashtra has offered 4% rates for its airports, excluding Pune and Mumbai. There is yet to be any benefit to the air passenger starting off from these airports.
Meanwhile, there is still room for talks, if the airline operators are ready to bend backwards for a trade-off or two.
The final decision at the meet was that some airports could waive the 12.5% common rate to 4%, if the airlines operators give 8-10% concessional fares for those starting their journey from these airports.