Aviation industry demands reduction in ATF prices

An airlines industry body has sought reduction in customs and excise duties on Aviation Turbine Fuel (ATF) and allowing private firms to supply it to bring down prices.

The Federation of Indian Airlines (FIA) has said in a paper that high sales taxes imposed by state governments made the jet fuel prices, which account for almost 40 per cent of an airline's annual expenditure, prohibitive.

Comparing ATF prices with those at major Southeast Asian and Gulf airports, the Federation said ATF prices in India were 73 per cent higher than in Southeast Asian countries and Gulf countries.

The ATF price per kilolitre in Singapore in March this year were Rs 20,779 per kilolitre while in India the prices were above Rs 30,000 in major cities, it said, adding that customs duty of 10 per cent and excise duty of 8.24 per cent was levied on it by the central government.

Public sector oil firms had on May 1 raised jet fuel prices by 3.5 per cent.

The prices of ATF in Delhi were raised from Rs 36,149.04 per kilolitre (kl) to Rs 37,421.94 while in Mumbai the prices went up by Rs 1,325.94 per kl to Rs 38,690.39 per kl.

Bolstering the industry's demand, a Parliamentary Committee has also asked government to notify jet fuel as a "declared good" to bring down sales tax.

In a report tabled in Parliament, the Standing Committee on Transport, Tourism and Culture has asked Finance Ministry to "sympathetically consider" the Civil Aviation Ministry's proposal to notify ATF as "declared good" on a priority basis to all aircraft in order to contain sales tax at a maximum rate of four per cent.

The highest sales tax rate of 33 per cent was imposed by Andhra Pradesh, followed by 30 per cent imposed by Gujarat, 29 by Tamil Nadu and Bihar, 28.75 by Kerala and Madhya Pradesh, 28 by Rajasthan and Karnataka and 25 per cent by Maharashtra, Himachal Pradesh, Chhattisgarh and West Bengal.

Compared with this, Mizoram and Andaman & Nicobar Islands did not impose any sales tax at all, the FIA said.

Pointing out that ATF was categorised as a "declared good" for small turbo-prop aircraft and regional jets, the industry body suggested that this should be extended to all types of larger aircraft as well.

The FIA also said a major reason for high price, even after de-regulation of ATF prices, was the "monopoly of the three state-owned oil companies".

"Because of the limited number of suppliers, there has hardly been any effective choice of the airline industry, with the three state-owned oil companies fixing ATF prices on a mutually agreed common formula between them".

Maintaining that marketing rights have now been granted to companies like Reliance, Essar and ONGC, it said these firms have not been able to start ATF supply as they were not allotted space by the Airports Authority of India.

It, however, said that Reliance has recently been allotted land at 25 airports and was working on constructing aviation fuelling stations.

"It is hoped that the resultant competition will bring about a reduction in the unreasonable ATF price levels prevalent in India," the FIA said.