Airline industry calls for rationalisation of ATF taxes

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India’s domestic airlines have called for rationalisation of taxes on jet fuel to counter the massive rise in fuel prices.

On Wednesday, high crude oil prices led OMCs to hike ATF prices to more than Rs 1 lakh per kilolitre. In the national capital, the price of jet fuel was raised by 18.32 per cent to Rs 1,10,666.29 per kilolitre (kl) from Rs 93,530.66 per kl.

In the other metro cities of Kolkata, Mumbai and Chennai, the price was increased to Rs 1,14,979.70, Rs 1,09,119.83 and Rs 1,14,133.73 per kl, respectively.

The rise came as crude oil price has remained on elevated levels due to the Russia-Ukraine crisis. Fuel retailers revise jet fuel prices on a fortnightly basis.

“Over the past few weeks, crude oil prices have soared to a seven-year high nearing $140 per barrel, due to the ongoing conflict in Europe. This has resulted in over 50 per cent ATF price hike from January 2022 till date, including the 18 per cent hike today,” said Ronojoy Dutta, Whole-time Director and Chief Executive Officer, IndiGo.

“This situation adversely impacts us, given that ATF constitutes over 45 per cent of our operational costs. We have been in talks with the government to bring ATF under GST as it brings the benefit of input tax credit,” Dutta added.

According to Dutta, such measures are needed now more than ever to offset this increase in cost and make flying viable for airlines and affordable for consumers.

“A rationalisation of taxes will result in high growth for the sector, creating a multiplier effect throughout the economy, promoting trade, tourism and job creation,” Dutta said.

In India, the domestic ATF prices are derived from international fuel prices, denominated in the US dollar, thereby rendering the ATF prices susceptible to exchange rate movements.

Notably, the rupee has also seen depreciation against the US dollar lately, which has been reflected in the prices.

The ATF prices are much more expensive than international benchmarks due to high levels of taxation.

The industry has been demanding that the fuel type be brought under the ambit of GST, similar to the status given to ‘Bunker Diesel’ which is used in the shipping sector.

A Vistara spokesperson said: “The resumption of scheduled international flights from March 27 is expected to stimulate demand and we hope it will help the industry in managing the increase in ATF prices.”

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