The Hindu Business Line : ATF price rise: Praful Patel to meet Chidambaram

The Minister for Civil Aviation, Mr Praful Patel, is to meet the Finance Minister, Mr P. Chidambaram, in the next few days to discuss ways to curb the spiralling prices of domestic aviation turbine fuel (ATF).

"The aviation industry is affected by the rising ATF prices. Something needs to be done. We need to find a way out that harms neither the States nor the aviation sector. With more and more people travelling by air, we would like to encourage the growth of this industry by addressing the issues of taxes on ATF," Mr Patel told newspersons here on Tuesday.

Domestic price

In the recent past, the price of ATF has been continuously moving northwards impacting the financials of most domestic airlines.

While in 2004-05 the average domestic price of ATF was around Rs 27,500 per kilolitre, it touched Rs 35,200 during 2005-06 and peaked at close to Rs 38,000 per kilolitre in April.

The state-owned Indian Airlines alone has estimated that the recent increases in ATF prices have put an additional financial burden of Rs 400 crore on the airline.

High sales tax

The high rate of sales tax on ATF, which varies from 4 per cent to 39 per cent, is said to be one of the main reasons for domestic jet fuel prices being so high.

While Kerala and Madhya Pradesh levy a sales tax of 28.75 per cent on ATF, Andhra Pradesh levies a sales tax of 34 per cent.

To overcome the rising fuel bill, especially as ATF constitutes 30-35 per cent of operating costs, the major domestic airlines have already imposed a fuel surcharge of Rs 300.

Industry has also suggested that ATF be categorised as a declared good under Central Sales Tax so as to cap the sales tax at 4 per cent.