Thursday, March 09, 2017

After concession under RCS, airlines seek fuel tax cut for all routes

Mumbai: The airlines want the government to reduce taxes on aviation turbine fuel (ATF) for all routes and not just those covered under regional connectivity scheme (RCS) as the operating cost is expected to increase by about 10% in FY18 on the back of hike in oil prices.

The Delhi government on Wednesday announced a reduction in value added tax (VAT) on ATF to 1% from 25% earlier on planes fuelling tanks for flying to airports under the RCS. This move will help in bringing down the airfares for common passengers as fuel constitutes more than 40% of the total operating cost of the airlines in India, claim experts.

The airlines have long been lobbying for a reduction in the taxes on ATF in India, which are said to be among the highest in the world.

Commenting on the development Aditya Ghosh, president and whole-time director at low-cost carrier IndiGo, said, "I understand that this relief is only for the regional connectivity routes. While this is a welcome move and it will provide the much-needed impetus to the regional connectivity scheme, we do request that this tax break is broadened to all air travel out of Delhi as it will allow IndiGo to provide even more affordable air travel to millions of our customers out of Delhi which is our biggest base of airplanes."
IndiGo's main base is at Delhi though there are smaller bases in other parts of the country.

Ajay Singh, CMD of SpiceJet said, "This is a welcome move, which will help reduce costs and, in turn, help bring down fares for flights to smaller airports in the country. We support all initiatives that help reduce fares for our consumers." Senior executives from Jet Airways and national carrier Air India too shared similar sentiments.

RCS, which was announced in October last year, is basically a market-based mechanism in which airlines bid for seat subsidies to connect unconnected/under-served airports in the country. The fare under the scheme has been capped at Rs 2,500. A lot of airlines in the country including a few scheduled ones like Air India, SpiceJet, IndiGo, among others are believed to have shown interest in the scheme. The Central government, in order to push the aviation growth in India, has asked all the states in the country to decrease the taxes on ATF.
09/03/17 Shahkar Abidi/DNA