Jet fuel likely to be cheaper: Ministry to slash state taxes on fuel

The civil aviation ministry has proposed slashing state taxes on jet fuel, which may significantly bring down costs for ailing local airlines that are reeling under a debt load of $20 billion and annual losses of $2 billion.

The ministry has sought opinion from stakeholders on reducing state taxes on jet fuel to a uniform 4 per cent by bringing ATF under the ‘Declared goods' category.

Currently ATF costs comprise about 40-50 per cent of operations of domestic airlines. On an average the sales tax rate on ATF is around 20 per cent which makes aviation fuel price at Indian airports significantly higher than in Singapore, Hong Kong, Dubai, London and Abu Dhabi.

Reduction in the fuel tax would allow the Indian carriers to become competitive in servicing passengers to their respective hubs within India and compete with international carriers. This advantage would allow them to increase their market share.