Scindia: Jyotiraditya Scindia writes to five states to lower VAT on jet fuel – Times of India

NEW DELHI: Union aviation minister Jyotiraditya Scindia has yet again urged five states to lower VAT on aviation turbine fuel (ATF). While 19 states and UTs have moved to the low VAT regime after Scindia’s intervention, five states still continue to levy high rates with Bihar and Tamil Nadu at 29%; Delhi and West Bengal at 25% and Assam at 23.65%. With finmin not yet conceding to aviation ministry’s old request to lower excise on ATF, the only way to rationalise jet fuel prices is tax cut by states.
“Scindia has again written to the five states on Monday. All other states have agreed to lower tax on ATF and are reaping the benefit of that. Only these five are yet to come on board,” said a ministry official.
“It is my fervent appeal and hopefully they will understand the multiplier effects of lowering tax rates in terms of they want a larger chunk of a smaller pie or a smaller chunk of a larger pie. There are multiplier effects both in terms of refuelling and connectivity. This is being reaped by lot of states where tax on ATF has fallen…. airlines will get refuelling done in states where fuel is cheaper. That economic reality has to dawn on them at some point or the other. If 28 states are charging between 1% and 4%, and some (much higher), then you as an airline know where to refuel from. Earlier airlines didn’t have an option. Today you have an option,” Scindia had said recently.
Indian carriers have historically faced high operating costs primarily due to steep ATF prices — caused by high base price and then even higher state and central taxes/duties on that. As a result, except IndiGo all other contemporary desi airlines face huge losses and require constant fund infusion from promoters or loans to remain airborne.
Barring IndiGo and until the recent entry of Tatas in the sector in a big way, Indian carriers remained financially weak to grow despite the huge air traffic that India — the world’s third largest domestic aviation market — sees. As a result, foreign carriers used to walk away with a lion’s share of international traffic to and from India till not so long back.
To change this and ensure financial viability in the sector, Union aviation minister Jyotiraditya Scindia has been requesting the Centre to reduce excise of ATF while pursuing states to cut VAT on the same.