Group of ministers to try cool aviation turbine fuel

New Delhi: A panel of senior Union ministers would look into the issue of high sales tax on aviation turbine fuel (ATF) and suggest ways to bring it down. The aviation industry which is reeling under heavy losses had recently threatened to suspend their operations in case the government failed to reduce the fuel cost burden by rationalising sales tax on jetfuel. In a Cabinet meeting on Thursday the government decided to form a group of ministers (GoM) to address the problem being faced by domestic carriers.
Civil aviation minister Praful Patel made a presentation to the Cabinet on Thursday and proposed to set up a GoM to examine the high fuel coast burden on airlines. He also mentioned the need to infuse fresh equity in the loss-making Air India to help in tide over the financial crisis. Converting high interest loan into low-cost one also figured out during his presentation. “The Cabinet has agreed to form a GoM which will look into the sales tax on aviation turbine fuel (ATF) and high base price of jetfuel,” Mr Patel told reporters after the Cabinet meeting.
Stressing the need to rationalise taxes on ATF, the minister said that India though being the ninth biggest aviation market in the world was still the least penetrated. He said that the country accounted for 0.02 air trips per capita, compared with 0.1 in China and 2.2 in the US.
Mr Patel also expressed concern over falling yield of airlines as a result of increasing input cost mainly jetfuel.
“The average airline ticket price had fallen from Rs 6,035 in 2003 to Rs 3,956 in 2008 while variable costs like that of ATF kept rising,” he said. Jetfuel contributes nearly 40% to the total operating cost of an airline. The airline industry is estimated to have lost Rs 10,000 crore in 2008-09 mainly on account of high fuel price and excess capacity.
14/08/09 Economic Times

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Categories: Indian Aviation- In General Aug 2009