Kerala slashes tax rate on aviation turbine fuel

New Delhi: Immediately after the huge cut in taxes for aviation turbine fuel (ATF) affected by the Andhra Pradesh government, the LDF government in Kerala followed suit on Thursday bringing rates down from an astounding high of 32 per cent to 4 per cent.

Announcing the cut in the state budget for 2008-09, Kerala finance minister Thomas Isaac said he expected that airlines would now pass the concession on to passengers by reducing fares.

Welcoming the decision, civil aviation minister, Praful Patel said, "It will boost tourism and economic activity in the state. I wish other states also take a cue from Andhra Pradesh and Kerala".

Airline officials said that the move to slash ATF prices is expected to lead to Rs30-50 crore in savings for them.

ATF accounts for around 40 to 60 per cent of the operating cost of airlines.

According to industry analysts, Kerala airports have the highest operating costs because of the expensive ATF prices and ground-handling charges. Since new regulations on ground handling are also expected to come into operation soon the cost of flying to Kerala is expected to come down further.

The price of ATF in the country is 60 to 70 per cent higher than the international benchmark mainly due to the taxes charged by the States.