Rationalisation of aviation turbine fuel (ATF) seems a distant dream for airlines who have been lobbying with the government to formulate a 4% uniform tax regime across the country on ATF.
Currently, except for states such as Andhra Pradesh, Kerala, Rajasthan and Pune in Maharashtra which collect 4% tax on ATF, the remaining states charges anything between 25-35% taxes on ATF which is nearly 40% of the operating cost to any airlines.
According to sources in the civil aviation ministry, the central government cannot with immediate effect ask states to cut down on taxes on ATF.
A source at the ministry said, ?The central government cannot with immediate effect downgrade the tax structures simply because it would translate into lesser revenues for their respective exchequer.?
He further added that if the states lower taxes on ATF, they will simultaneously have to increase taxes on some other commodity, which may not be acceptable to that particular industry.
In 2008, Mumbai and Delhi paid over Rs 3,000 crore to the state exchequer towards taxes on ATF. The airports in New Delhi and Mumbai account for not just half the passenger traffic in the country, but also 40% of ATF consumed in India.
Meanwhile, airline like private carrier Jet Airways has an annual fuel bill of nearly Rs 4,195 core for FY09 and Kingfisher Airlines also has a bill of nearly Rs 5,000 crore and low cost carrier GoAir buys fuel of approximately Rs 360 crore etc annually.
An official from an oil marketing company said, ?Airlines collectively buy ATF of over Rs 1,000 crore each month. For instance if the fuelling of aircraft is done in Mumbai, the taxes comes to Rs 250 crore each month and if that if billed at 4%, it is 40 crore, a loss of Rs 210 crore to the state exchequer.