Domestic carriers like Kingfisher and Air India can expect lower tax burden on jet fuel which accounts for 40% of their total operating cost. Civil aviation minister Ajit Singh has urged all the states to reduce sales tax on aviation turbine fuel to help the ?stressed? airline sector survive. The move comes after the finance ministry refused to cut central tax on ATF saying there was no scope for it.

?The minister has written to all the state chief ministers for bringing down sales tax which ranges from 4-30%,? official sources told FE.

Most of the carriers in the country are in red with fuel pushing up the operating cost. The two BSE-listed airlines Jet Airways and SpiceJet have reported net loss of R101 crore and R39 crore, respectively in the quarter ending December 2011 mainly due to high jetfuel price. All the airlines together are expected to register a record loss of nearly R12,500 crore in 2011-12.

?The minister has told the states that a reduction in tax would not result in revenue loss for them as fuel upliftment by airlines would go up with fuel price being lower,? said the official.

The ATF price in the country is priced nearly 50-65% higher compared to neighbouring aviation hubs such as Dubai, Kuala Lumpur and Bangkok. The airline industry body Federation of Indian Airlines (FIA) has made representation to Prime Minister?s Office (PMO) for rationalising taxes and levies on jetfuel. The country?s largest private carrier by passenger flown Jet Airways last week said that its losses have been mainly contributed by high fuel price.

?High jetfuel price continues to be our main concern. In spite of increase in passenger numbers our yield has not gone up,? an executive of a private airline said.

Jet Airways per passenger revenue in the quarter ending December fell 4.8% to R4,960 (inclusive of fuel surcharge) against R5,210 in the corresponding quarter the previous year. The company saw its fuel expenses going up 56% during this period.

As per an industry estimate, a 10% increase in fuel cost raises the operating cost by 300-350 basis points.