Cabinet okays GoM on ATF issue

The Union Cabinet has decided to form a Group of Ministers (GoM) to look into the issues on aviation turbine fuel (ATF), said Civil Aviation Minister Praful Patel.

The meeting was chaired by the prime minister. Patel made a presentation on the aviation sector.

The GoM will look into the issue of variable sales tax charged by states on the jet fuel. The tax ranges from nil to 30 per cent.

Andaman and Nicobar Islands charge no tax on ATF, while it is 4 per cent in Andhra, Rajasthan and Maharashtra (barring the cities of Mumbai and Pune). The tax in Karnataka, Bihar, Madhya Pradesh, Tamil Nadu and Gujarat is 28-30 per cent and it is 25 per cent in West Bengal and Himachal Pradesh.

The other issue the GoM would look into is the high base price of the aviation fuel. The price for each kilolitre of jet fuel averages between Rs 24,000 and Rs 26,000 in East and Southeast Asia. But, its price in Andhra Pradesh, which has only a 4 per cent sales tax, is about Rs 35,000. In Delhi, it is Rs 38,000, in Mumbai over Rs 40,000 and in Kolkata Rs 46,000.

ATF accounts for over 40 per cent of the total operational cost of an airline in India, compared with 20-25 per cent globally.

The minister said he also briefed the Cabinet on the need for additional capital infusion in Air India, which currently has an equity base of only Rs 145 crore. On airport charges Patel said these accounted for 7-8 per cent of their total operating costs and the rates in India were comparable with the rest of the world. Patel also announced that India had emerged as the ninth biggest aviation market in the world, but was “still the least penetrated”. The size of the Indian aviation industry is $14 billion, he added.