The debt ridden airline industry could get some more relief in the form of a lower tax burden on aviation turbine fuel (ATF). The finance ministry is considering the civil aviation ministry?s proposal to reduce customs and excise duties on the fuel.
ATF, used by domestic airlines attracts customs duty at 5% and excise duty at 8%, besides education cess.
North Block has asked for certain clarifications from the civil aviation ministry on the issue. Since ATF is priced at import parity rates, it may be difficult to lower the customs duty burden on it, an official source said, adding that the issue will be discussed further before a final discussion is taken.
State governments already have shown their disinclination to bring the fuel under the ?declared? goods status to tax it at a later rate. However, Patel was very upbeat about the finance ministry?s response. He said Chidambaram had assured that in due course of time, he would try to take all appropriate measures. Airlines have already been given a bail out package of sorts. On Wednesday, private carriers were allowed to clear their outstanding of Rs 2,962 crore by March next year and credit period has been extended to 90 days from 60 days.
Over 40% of the operating costs of domestic airlines are on account of ATF as against 20% for international carriers. In fact it is about 60-70% more expensive in India compared to prices internationally mainly due to various central and state levies.
Civil aviation minister Praful Patel said finance minister P Chidambaram was appreciative of the concerns raised by airlines. ?Certainly he (Chidambaram) does feel there is a case for rationalisation of taxes. It might not be there in the past but in today?s high-cost environment (it is needed)…in a few days, appropriate measures would be taken,? Patel said after meeting Chidambaram on Thursday.