ATF Customs duty may fly at half-mast

New Delhi: In yet another move to keep loss-laden airlines afloat, the government is exploring a proposal to cut the Customs duty on aviation turbine fuel (ATF) to 2.5% from the existing rate of 5%. The move is aimed at making jet fuel cheaper and help the airlines reduce their operating costs that has moved up significantly due to high fuel price.
In the wake of spiralling fuel prices during April-August period, ATF prices shot up, creating huge cost over-run for airlines. Fuel prices have since come down 21% following a drop in crude oil prices. However, even after the dip, the current prices do not augur well for airline companies. Domestic carriers had planned fleet expansion assuming fuel price at Rs 36,000 per kilolitre, but the ATF price hovers at nearly Rs 57,000 per kilolitre.
“We are not in favour of completely doing away the Customs duty as it would cause revenue loss. We are, however, agreeable to cutting down Customs duty by 50% in view of the financial crisis being faced by airlines,” a source in the finance ministry said.
The civil aviation ministry has been demanding to notify ATF in the declared goods category thereby attracting a uniform duty of 4% in lieu of sales tax, which averages around 23%. It had also urged the petroleum ministry to effect a downward revision of the base price of the aviation fuel. Of late, the demand got stronger as airlines started cutting down capacity and laying off staff to reduce losses.
31/10/08Nirbhay Kumar & Deepshikha Sikarwar/Economic Times

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Categories: Indian Aviation- In General Oct 2008