The Hindu Business Line : AP sales tax cut on ATF: AI to save Rs 30 cr, SpiceJet Rs 12 cr

Snapshot
Some airlines have hinted at a reduction of the fuel surcharge charged on flights to and from the State.
AP Govt move provides level playing field to airlines that do not have small aircraft in their fleet.

Ashwini Phadnis

New Delhi, Feb 15 The decision of the Andhra Pradesh Government to reduce sales tax on aviation turbine fuel (ATF) to 4 per cent will provide a windfall to the airlines although passengers are unlikely to benefit from any drastic fall in fares. Some airlines, however, have hinted at reducing the fuel surcharge that is charged on flights to and from the State.

A senior official of Air India said the State Government decision would help the airline save around Rs 30 crore annually. Similarly, the low cost airline, SpiceJet is expecting a monthly reduction of about Rs 1 crore in its fuel costs, airline’s Chief Financial Officer, Partha Sarathi Basu, said.

The President and Chief Executive Officer, IndiGo Airlines, Mr Bruce Ashby, while welcoming the decision said that the airline was still evaluating the exact economic impact on the bottomline of the airline. The Chief Executive Officer, JetLite, Mr Gary Kingshott, termed the State Government decision as “excellent news.”

Airlines, however, felt that it will be difficult to reduce fares as taxes on fuel in other parts of the country still remain high and vary from 4 per cent to 36 per cent. The domestic aviation industry maintains that the high incidence of sales tax and the global increase in prices of ATF are the two major causes for the huge losses being registered by them. ATF accounts for 35-40 per cent of the operating cost of most major domestic airlines.

The Andhra Pradesh Government move will also provide a level playing field to all domestic airlines specially those that do not have small aircraft in their fleet and operate to and from the State. At the moment, airlines operating small aircraft seating up to 70 passengers are provided ATF at 4 per cent sales tax throughout the country. However, larger aircraft pay much higher costs for procuring ATF.

But after the latest decision of the Andhra Pradesh Government, airlines irrespective of whether they operate small or large aircraft will be provided ATF at 4 per cent instead of 33 per cent when they fly to and from the State.

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