The Hindu Business Line : Paramount may benefit from ATF sops extension

Advertisement

Bangalore Feb. 28 Paramount Airways could be the only airline currently which might benefit from the Union Budget's proposal to include smaller aircraft for ATF sops.

As per the new Budget proposal, ATF (aviation turbine fuel) concession has been extended to even small aircraft and small jets which weigh less than 40,000 kg. Till now only turbo jets were accorded ATF sops in an attempt to encourage airlines to fly to smaller cities. As Paramount is the only airline which has Embraers which weigh less than 40,000 kg, it will benefit from the government's concession.

According to aviation analysts, while turbo-props attracted only 4 per cent sales tax on ATF price, all other aircraft attracted sales tax of between 24 and 32 per cent. Analysts say that a scheduled airline with a fleet size of five small jets such as Embraers can save as much as between Rs 50 and 60 lakh on fuel a month. The Paramount Airways' Managing Director, Mr M Thiagarajan, told Business Line that till now airlines with turbo-props had an unfair advantage. "Now we have a level-playing field," he said. He said till now the airline was paying 30 per cent as taxes on ATF. "We will now be able to fly on more regional routes," he said.

He said this will give fillip to business tourism as it will encourage venture capital funds to invest in certain categories of hotels.

Meanwhile, the withdrawing of exemption from withholding tax will increase lease rental charges for airlines between $30,000 and $50,000 per month for an aircraft like A320. During the last few months, the lease rentals in the international market had gone up at least 10 per cent because of supply-demand mismatch and high interest rates. The Centre for Asia-Pacific Aviation's CEO for Indian subcontinent and the Middle East, Mr Kapil Kaul, said that the withdrawal of the exemption clearly shows that the Government is not backing the sector. This measure will increase the operating cost at least 2 per cent for the airlines, he said.

He said the Government should have taken the opportunity for at least rationalising the ATF prices this time. Mr Kaul said now airlines will have to start steadily increasing their airfares as it has now become clear that the Government may not announce incentives for the sector in future. "It is important for the airlines to be rational and work on their fare structure so that they can be viable on a long-term basis," he said.