The Hindu Business Line : Panel asks Ministry to cut air fares as fuel prices fall

With the prices of aviation turbine fuel coming down, a committee headed by the Cabinet Secretary, Mr K.M. Chandrasekhar, has asked the Civil Aviation Ministry to examine possibility of cutting air fares.

The committee, set up to study the severe financial crunch faced by the airline industry, has also asked the Finance Ministry to look into means of tax rationalisation on aviation turbine fuel (ATF).

At a meeting on Tuesday, the committee has also asked the Finance Ministry to examine all aspects of giving ‘declared goods’ status to jet fuel that would help in bringing down the produce price, sources said. A declared good status would mean a flat four per cent tax on the product across the country.

Due to high incidence of taxes such as sales tax, ATF price was up by almost 30-40 per cent compared with what airlines pay for fuel in Singapore or Dubai.

The committee expressed concern over the sharp decline in passenger travelling by air domestically. It has asked the Ministry to look into the possibility of lowering air fares, which would increase traffic.

The committee reviewed the working of the sector in the backdrop of dip in fuel prices. The Ministry made a pitch for rationalising taxes on ATF so as to bring them down to international levels. ATF constituted 45-50 per cent of the operational costs of an airline.

Another factor affecting the industry was the weakening of the rupee against the US dollar, sources said. Substantial payments by the domestic airline industry were made in dollar terms in areas such as rentals for leased aircraft, spare parts, maintenance, foreign crew and training.

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