New Delhi: Rationalising taxes on aviation turbine fuel (ATF) could bring down operating costs of airlines by an average of 10-15 per cent, industry experts say.
Domestic airlines such as SpiceJet, Jet Airways and Indigo blame steep jet fuel prices (due to high tax components) for their high operating costs. The industry has been demanding rationalising of ATF State taxes, which are as high as 30 per cent in some places.
According to analysts, if the State taxes are brought to around 4 per cent (which most States have found favourable), it could help airlines save as much as ?5,000 crore in their fuel bills. Fuel bills account for almost 50 per cent of the operating costs of an airline.
Estimates show that domestic airlines spent around ?27,000 crore on ATF in 2013-14. According to the estimates of the Centre for Asia Pacific Aviation, the industry had a combined loss of $1.77 billion (around ?11,200 crore) in 2013-14.
For example, Air India, which buys about 70 per cent of its fuel from domestic suppliers, bought about 12.7 lakh kilolitres of ATF locally in 2013-14, incurring an expense of around ?9,000 crore.
On an average, every kilolitre of fuel bought locally cost the national carrier around ?70,500, inclusive of taxes. Assuming it paid an average tax rate of 25 per cent (as Air India’s refuelling was mainly from the larger centres) in 2013-14, a uniform 4 per cent tax would have helped the airline save as much as ?11,900 per kilolitre or about ?1,500 crore in 2013-14.
23/12/14 Debabrata Das/Business Line
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Domestic airlines such as SpiceJet, Jet Airways and Indigo blame steep jet fuel prices (due to high tax components) for their high operating costs. The industry has been demanding rationalising of ATF State taxes, which are as high as 30 per cent in some places.
According to analysts, if the State taxes are brought to around 4 per cent (which most States have found favourable), it could help airlines save as much as ?5,000 crore in their fuel bills. Fuel bills account for almost 50 per cent of the operating costs of an airline.
Estimates show that domestic airlines spent around ?27,000 crore on ATF in 2013-14. According to the estimates of the Centre for Asia Pacific Aviation, the industry had a combined loss of $1.77 billion (around ?11,200 crore) in 2013-14.
For example, Air India, which buys about 70 per cent of its fuel from domestic suppliers, bought about 12.7 lakh kilolitres of ATF locally in 2013-14, incurring an expense of around ?9,000 crore.
On an average, every kilolitre of fuel bought locally cost the national carrier around ?70,500, inclusive of taxes. Assuming it paid an average tax rate of 25 per cent (as Air India’s refuelling was mainly from the larger centres) in 2013-14, a uniform 4 per cent tax would have helped the airline save as much as ?11,900 per kilolitre or about ?1,500 crore in 2013-14.
23/12/14 Debabrata Das/Business Line
