New Delhi: The government continues to treat flying as a rich man’s mode of transport, levying fresh taxes on jet fuel and this is where its fatal policy flaw lies. The potential for economic development of India is linked with growth in its aviation sector and unless the government sheds this mindset – which has propelled it to further increase the excise duty on jet fuel in 2016-17 from 8% to 14% - the true potential of aviation may never be realized.
Heck, government’s own objective, of getting the common man to fly, will remain a pipe dream unless air fares are further reduced significantly. And this can only happen with sensible taxation on aviation turbine fuel (ATF) – not by jacking up taxes while comparing taxation of petrol and diesel to justify the increase. India holds the dubious distinction of being the least appreciative of its airlines since it taxes ATF the highest, with jet fuel prices 60-70% higher here. Since fuel accounts for almost half of an airline’s operating cost, it automatically means airlines are neither able to pass on the full benefit of benign global prices to consumers nor are they able to offer cheaper fares to entice first time flyers.
Now let us see how lowering taxes on jet fuel connects with privatizing Air India. A study conducted jointly by Ficci and KPMG has underlined the need for privatization of this white elephant, saying the Rs 30,000 crore being injected into the airline under a bailout package should be directed elsewhere. “Voices for privatization of Air India become louder: The airline business requires split second operational, commercial and financial decisions which is not possible in the government environment. The industry also requires significant empowerment of junior officers which again is difficult in the government environment where employees are often worried about a backlash in case a bonafide decision taken with good intent goes wrong. Air India needs to be privatised for its own benefit. The Rs 30,000 crore bailout package for Air India is heavily criticised. This money can instead be used to reduce VAT on ATF and reimburse the states for their losses for 3-5 years”. So added to all other operational reasons for the government to exit the business of flying is another one, where the industry would benefit through lowering of taxes on jet fuel!
17/03/16 Sindhu Bhattacharya/First Post
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Heck, government’s own objective, of getting the common man to fly, will remain a pipe dream unless air fares are further reduced significantly. And this can only happen with sensible taxation on aviation turbine fuel (ATF) – not by jacking up taxes while comparing taxation of petrol and diesel to justify the increase. India holds the dubious distinction of being the least appreciative of its airlines since it taxes ATF the highest, with jet fuel prices 60-70% higher here. Since fuel accounts for almost half of an airline’s operating cost, it automatically means airlines are neither able to pass on the full benefit of benign global prices to consumers nor are they able to offer cheaper fares to entice first time flyers.
Now let us see how lowering taxes on jet fuel connects with privatizing Air India. A study conducted jointly by Ficci and KPMG has underlined the need for privatization of this white elephant, saying the Rs 30,000 crore being injected into the airline under a bailout package should be directed elsewhere. “Voices for privatization of Air India become louder: The airline business requires split second operational, commercial and financial decisions which is not possible in the government environment. The industry also requires significant empowerment of junior officers which again is difficult in the government environment where employees are often worried about a backlash in case a bonafide decision taken with good intent goes wrong. Air India needs to be privatised for its own benefit. The Rs 30,000 crore bailout package for Air India is heavily criticised. This money can instead be used to reduce VAT on ATF and reimburse the states for their losses for 3-5 years”. So added to all other operational reasons for the government to exit the business of flying is another one, where the industry would benefit through lowering of taxes on jet fuel!
17/03/16 Sindhu Bhattacharya/First Post
