Budget 2019

With ATF duty hike, flying between cities may get costlier

Our Bureau New Delhi | Updated on January 27, 2018 Published on February 29, 2016

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But plan to develop non-functional airports gets a thumbs up

Domestic flying — between the metros and most other cities — could become more expensive if Indian airlines pass on the increase in excise duty on aviation turbine fuel (ATF) to flyers.

The excise duty on ATF — other than what is supplied to scheduled commuter airlines (SCAs) — is being increased from 8 per cent to 14 per cent. SCAs is a new category of airlines proposed to be set up to enhance regional air connectivity.

“The increase in duty on ATF will make the raw material costlier by 4-5 per cent. At a time when ATF in India is 60-70 per cent costlier than global prices, it goes against the government’s stated objective to make flying affordable for the masses,” said Amber Dubey, partner and head-aerospace, KPMG.

Once implemented, the scheme could see a Delhi-Mumbai ticket go up ₹150-200, airlines indicated. At present there is no unanimity among the airlines on whether they will absorb the increase in excise duty on ATF or pass it on passengers — entirely or partly.

Commenting on Finance Minister Arun Jaitley’s announcement that the Centre is looking to develop 160 non-functional airports at a cost of ₹50-100 crore each, apart from developing 10 defunct airstrips with State governments, Kabir Bogra, Associate Partner, Khaitan & Co, said it will provide a “huge impetus to regional airlines.”

Mixed bag

Terming the Budget as a mixed bag, the Maintenance Repair and Overhaul Association said that while reforms in terms of duty-free period for parts, relaxation in customs procedure, and removal of customs duty on tools are welcome, “a bigger relief in terms of zero rating of service tax, providing infrastructure status and zero duty on consumables/expandable” has been left out of the Budget.

However, Conrad Clifford, Regional Vice-President, Asia-Pacific, International Air Transport Association (IATA), felt the Budget has little focus on aviation.

Meanwhile, Air India plans to approach the Centre, seeking additional funds of over ₹2,000 crore, as the State-owned airline has been provided with ₹1,713 crore in Budget 2016-17.

As part of a turnaround plan, it was hoping to get around ₹4,000 crore next fiscal. The funds provided by the Budget will be used to repay government guaranteed loans, sources said.

Published on February 29, 2016
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