Reduce tax on jet fuel, say airline operators

Written by Shaheen Mansuri | Shauvik Ghosh | Mumbai, New Delhi, Apr 7 | Updated: Apr 9 2008, 05:28am hrs
With Maharashtra, Kerala and Andra Pradesh reducing their taxes on aviation fuel to 4%, various airlines are now asking for a rationalisation of taxes by all states. The reduction in sales tax will not only them reduce operating costs, but will also prevent air fares from escalating on high crude prices.

Meanwhile, the ministry of civil aviation has also come out with a proposal to reduce sales tax on jet fuel at a uniform level, nationwide. The ministry calls for an intermediate sales tax at 15-16% in every state, which will help airlines reduce operating costs. Jet Airways chairman Naresh Goyal said, Sales tax should be equal across states.

Echoing that view and highlighting the fact that Maharashtras move excludes two important cities, Edgardo Badiali, CEO, GoAir, in an email response told FE, Considering the fact that over 50% of the traffic movement takes place from Mumbai and Pune, the tax benefit should also be extended to these airports as well.

The CFO of the airline, GP Gupta, also hoped that other state governments, including Delhi, would follow suit. Airfares have gone up due to the high fuel tax from April 3. Aviation expert Kiran Yadav said jet fuel prices in the country are the highest in the world. He added, Mumbai and Delhi, among other airports, are treated as cash cows.

At Rs 2,000, the fuel surcharge on airfares has gone up ten times since November 2005. Oil PSUs have raised the price of aviation turbine fuel by 12-14% as crude prices hover at $100 a barrel.