Running the extra mile for the Centre’s regional connectivity scheme, UDAN, the Kerala government has trimmed its VAT rate on aviation turbine fuel (ATF) by 5% from the existing 28.75%. This would be valid for a period of five years. The Centre had requested states to reduce VAT on ATF by 1%, to encourage flight services connecting important cities in the country. However, to add to the incentivisation in good measure, Kerala decided to reduce VAT by 5%, an official release said. A cabinet meeting chaired by CM Pinarayi Vijayan took the decision.
The new rate, when effective through an ordinance, would be valid for all airlines, including foreign carriers operating to Thiruvananthpuram, Kochi, and Kozhikode and the upcoming airport at Kannur. The state government is also planning to construct airstrips in Munnar, Guruvayur, Wayanad and Bekal to improve regional connectivity.
The rate cut would make Kerala more friendly to UDAN. Under the scheme, states have been asked to make land available, ensure adequate security, and supply essential services at concessional rates for airports/airstrips. By this scheme, flying will be made affordable by capping fares at Rs 2,500 a seat per hour. Viability gap funding (VGF) per seat will be offered by the Centre and the state governments are counted to bear 20% of it.
As Kerala expects to be a state that would have five airports in the next five years, optimising on regional air connectivity is crucial to the state government’s game-plan.