High ATF cost eroding profitability of domestic airlines: Assocham

15 Apr 2008

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New Delhi: Domestic airlines in India are paying taxes on aviation turbine fuel (ATF) that are eight times higher than those paid by international carriers in their own countries, industry trade body Assocham said on Monday. For India's domestic carriers, the taxes on ATF work out to a high of 66 per cent.

Assocham said that these rates are eroding the profitability of Indian carriers by 11-16 per cent. The industry trade body said that jet fuel is the largest component of operating expenses for airlines, accounting for almost 35-40 per cent of their total cost.

According to Assocham president, Venugopal N Dhoot, if the government reduces sales tax on ATF by about 10 per cent and customs duty by 4-5 per cent, it will allow the domestic aviation industry to save about Rs6,000 crore on an annual basis.

Assocham also points out that the aviation industry is impacted significantly by a multi-layered indirect tax system, which includes value-added tax, service tax, excise duties and customs duties. It said that the fact that since these indirect taxes were not uniform they needed to be corrected.

Assocham also said that the aviation sector had shown an impressive growth after the arrival of low-cost carriers in 2003, with domestic passenger traffic growing at an annual rate of 19 per cent from fiscal 2002 to 2005-06.

In the international sector, this traffic grew at an annual rate of 13.7 per cent in the same period, it said.

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