Fuel impact: Praful Patel, State finance ministers to try and resolve ATF sales tax issue on 16 June

New Delhi: Though there was a great degree of expectation within the domestic aviation industry about concrete results emerging from the meeting between civil aviation minister Praful Patel and prime minister Manmohan Singh on Wednesday no decisions were taken. Patel now moves to the next stage of his campaign to provide relief for the embattled domestic airlines when he meets the empowered committee of state finance ministers on 16 June.

At this meeting he will try and convince the state ministers to bring down sales tax on aviation turbine fuel to 3 per cent. Soaring price of jet fuel has left domestic airlines bleeding, and collectively they are expected to register a Rs8,000 crore loss in the fiscal 2008-09.

''We highlighted the concerns of aviation industry to the prime minister and he was sympathetic to the financial health of airlines. We raised the issue of giving aviation turbine fuel (ATF) the declared goods status. But, as sales tax is a state subject, it would not be a proper gesture to do so by the Centre. We would meet the state finance ministers in the next few days and pursue the issue,'' Patel said.

Meanwhile, following a meeting between the chief executives of various carriers and Patel on Wednesday, Kingfisher Airlines promoter Vijay Mallya said, ''The aviation industry is suffering heavy losses primarily due to unprecedented increase in fuel prices. It has become unsustainable and tax relief from the government along with rational thinking and pricing can alone provide relief.'' 

Airlines have warned that if the government doesn't take necessary steps to reduce ATF price, they would be compelled to slash operations providing restricted travel options to consumers.

Aviation turbine fuel, which till recently contributed to 40% of the total operating cost of an airline, now forms 50% of overall operating costs.

ATF prices have gone up 100 per cent over the last year and have tripled over the last four years, climbing from Rs21,000 per kilo litre in 2004, to more than Rs70,000 now.

Patel has said that he has proposed a ''declared goods'' status for ATF. At 3 per cent taxation rates, as proposed, it is slated to bring a relief of more than Rs3,500 crore to the sector.