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A senior Aeronautical Society of India office-bearer felt that the decision would certainly play a major role in increasing the traffic to the State.

Hyderabad , Dec. 16

THE Andhra Pradesh Government's decision to heavily reduce sales tax on Aviation Turbine Fuel (ATF) seems to have a `slow but telling' impact on the aviation industry. "Fuel costs plays an important role in the operational costs with the users forced to pay nearly 40 per cent taxes over and above the actual ATF price. If other States emulate Andhra Pradesh and reduce sales tax on ATF it will greatly help airlines cut their operational costs," an Indian Airlines spokesman said.

"A lot of churning is being taking place in the aviation industry. Moves are on to reduce travel time through cuts in route distances. Also, the shift in focus is on increasing volumes to offer reduced tariff. Reduction of ST on ATF will fit well in the scheme of things that are shaping up," the Indian Airlines official said.

The fact that Indian Oil Corporation (IOC), which holds 74 per cent share in ATF market in the State, doubled its monthly sales shows the impact of the industry. The total off-take of ATF from IOC in Hyderabad has gone up to 5,000 kilolitres from 2,600 kl per month after the revision.

The purchases by Indian Airlines has gone up to Rs 65 crore on 40,000 kl after the revision as against Rs 40 crore on 25,000 kl prior to the revision in the State.

The State Government had taken the bold decision in April 2002, by reducing the ST on ATF from 30.55 per cent to 4 per cent.

Besides, the State charges no tax on ATF for aircraft, which carry 50 or less passengers.

The comparative figure in Tamil Nadu is 29 per cent, Karnataka (28 per cent) and Kerala 15 per cent (surcharge) on 34 per cent, an IOC official said.

Obviously, the move has significantly brought down the sales tax receipts for the Commercial Tax Department on the ATF count. The figure for financial year ended March 2003, fell to Rs 12.57 crore from Rs 28.73 crore, a drop of 56 per cent.

The trend continues this year too. "Up to November, 2003, the receipts were at Rs 6.24 crore as against Rs 8.91 crore in the same period the previous financial year, a decline of 30 per cent," Mr T. Vivek, Joint Commissioner of Commercial Taxes Department, said.

"The decision to reduce sales tax on ATF is made ostensibly to give a fillip to the tourism industry. It is aimed at encouraging more refuelling, attracting more airlines to flow into the State," he said.

However, Chennai contributes most to IOC's ATF sales in the South, followed by Bangalore and Hyderabad. This is because the huge air traffic in Chennai," an IOC spokesperson said.

"Mr N. Chandrababu Naidu, the Chief Minister of Andhra Pradesh, has set the ball rolling by reducing the sales tax on ATF. This will go a long way in increasing the air traffic into the State. We expect the others to follow the suit. But only Chhattisgarh has come out with a similar gesture," an Indian Airlines spokesperson told Business Line from Delhi.

"We benefit from the move in two ways. The long-distance flights to the Gulf and New Delhi and the flights within the State are benefited. The decision also helped private players to make Hyderabad an important destination," he added.

A senior Aeronautical Society of India office-bearer felt that the decision would certainly play a major role in increasing the traffic to the State.

"A number of private airlines, including the British Airways, have shown interest to operate from the State," Mr Vijaya Kumar, a senior functionary of AeSI (Hyderabad) said.

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