More tax on ATF to earn Rs 120 cr a year for Andhra

The new increase in the tax on aviation turbine fuel (ATF) from 4 to 16 per cent in Andhra Pradesh would fetch the state exchequer an additional Rs 120 crore a year. However, this might take away the advantage Hyderabad enjoyed because of its lower tax rates.

The new tax structure, which came into effect from February 1, will leave only Maharashtra (excluding Mumbai and Pune) and Rajasthan at 4 per cent.

In spite of the increase, the tax on ATF in the state is still among the lowest in the country. While Delhi and Haryana charge 20 per cent tax each, Karnataka imposes 28 per cent, Mumbai and Pune 24 per cent, Tamil Nadu 29 per cent, Gujarat 30 per cent, while Bihar, Madhya Pradesh and Tamil Nadu charge 28 per cent tax each on ATF.

The average tax on jet fuel is 26 per cent and annual turnover from its sale is around Rs 10,000 crore.

Former chief minister Y S Rajasekhara Reddy had in February 2008 reduced the tax on ATF to 4 per cent, when the Hyderabad international airport was launched, to make the city an aviation hub. Following this, many airlines made Hyderabad their re-fuelling hub.

The state realised revenues in the range of Rs 37 crore-Rs 40 crore on account of this. Prior to February 2008, AP levied a 33 per cent tax and realised about Rs 300 crore per annum.

“The hike in tax is an effort to strike a balance between revenues and the rising expenditure and liabilities,” Ashutosh Mishra, principal secretary (revenue), told Business Standard.

Post-revision, the end price of ATF for the airlines would be around Rs 40.12 a litre, including the 16 per cent tax of Rs 5.53 on the base price of Rs 34.6 per litre. At 4 per cent, the end price is Rs 35.98 per litre on the same base price.

Compared with this, the end price of ATF at 33 per cent was Rs 52.24 a litre and Rs 40.85 a litre when the tax was reduced to 4 per cent.

“The new price is still lower than what the airlines had paid for the ATF two years ago. This is because of the decline in international oil prices,” Mishra said, adding that the revenues to the state were relative to oil prices.

GMR Hyderabad International Airport Ltd chief executive officer P Sripathy said: “It is difficult to assess the impact of the increase in tax on ATF at this point in time. The airlines might absorb the hike, but it depends on the agreements they have with the oil companies.”

However, the original advantage that Hyderabad derived due to lower tax on the ATF would erode, he added.