States not keen on cutting jet fuel sales tax
24 Aug 2009
There is no relief in sight for the struggling domestic airlines, as the States are not willing to consider any reduction in the sales tax on aviation turbine fuel (ATF), a longstanding demand of the country's aviation sector.
The empowered committee of state finance ministers which met on Saturday in Delhi decided against any cut on jet fuel sales tax on the grounds that it is still waiting for the details of the pricing policy from the petroleum ministry, to consider any scope for reduction.
Asim Dasgupta, chairman of the committed and the finance minister of West Bengal said in a briefing after the meeting: ''The states are in no mood to review the sales tax rates on ATF.''
States are also opposed to include ATF in the category of declared goods as suggested by the central government, which would have attracted a uniform sales tax rate of 4 per cent on the fuel. Currently, the category includes goods such as paddy, rice and other food grains, iron and steel, coal, cotton and LPG.
The losses suffered by the domestic aviation industry are estimated at approximately Rs10,000 crore in FY2009. Jet fuel is the single-largest element contributing to the airline costs in India, and its pricing is the most critical issue for the industry.
ATF accounts for around 40 per cent of operating costs of domestic carriers which is about double the global figure. Moreover, ATF is priced at 70-90 per cent higher in Indian airports compared to international benchmarks.
