Govt scraps customs duty on aviation fuel

New Delhi: In an attempt to bail out the aviation and steel industries, and keep its part of the bargain, the Congress-led United Progressive Alliance (UPA) scrapped the basic customs duty of 5% on jet fuel and withdrew the export duty on steel products, except scrap, on Friday.
The government had earlier agreed to a rationalization of jet fuel duties if the country’s airlines did not resort to layoffs to protect their profits.
“Though there are no imports of ATF (aviation turbine fuel) and it is a freely priced petroleum product, the price of domestically produced ATF is based on import parity price factoring in the basic customs duty. The exemption would result in lowering of the base price of ATF and, consequently, lowering the incidence of excise duty and VAT (value-added tax), giving substantial relief to the aviation sector,” the finance ministry said in a statement. Jet fuel accounts for around 45-55% of the operating costs of airlines in India.
Oil marketers are expected to cut jet fuel price by Rs6,000 per kl. Together with the new duty structure, this would result in a further fall in its rate.
“Though we have not calculated exact savings, we may reduce our cost by 6-7%,” said Parthasarathi Basu, chief financial officer, SpiceJet Ltd. “At this point of time we have no plans to review the fare structure or surcharge. First of all, we have to make profit,” said Wolfgang Prock-Schuaer, chief executive officer, Jet Airways (India) Ltd.
31/10/08 Sanjiv Shankaran and Utpal Bhaskar/Livemint

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Categories: Indian Aviation- In General Nov 2008