Govt classifies blended ATF with 2% excise for regional flight operators

The Centre levies a 2% excise duty on blended ATF for regional flights under a new category in the Central Excise Act; aviation sector urges incentives over cost concerns for voluntary adoption

Don't want to miss the best from Business Standard?

The Centre has introduced a separate classification for blended aviation turbine fuel (ATF) under the mineral items category in the Central Excise Act. This marks a preliminary step towards potentially making blended ATF optional for domestic flights next year, with a mandatory target set for 2027, according to a report by The Economic Times.

 

However, the aviation sector has raised concerns, warning that fuel costs may increase due to the blending requirement, which could lead to calls for government incentives to support voluntary adoption.

Excise duty on blended ATF

In a notification issued by the Department of Revenue under the Ministry of Finance, blended ATF used by select airline and cargo operators for flights under the Regional Connectivity Scheme (RCS) and the Ude Desh Ka Aam Nagrik (UDAN) scheme will attract an excise duty of 2 per cent. For other uses of blended ATF, the excise duty rate will be 11 per cent.

 

The report quoted a senior finance ministry official who described this reclassification as a foundational move, stating that further steps would depend on consultations with other ministries and agencies, including the Ministry of Civil Aviation (MoCA), Niti Aayog, and oil marketing companies (OMCs). The official clarified that this step creates a category but does not imply a timeline for mandatory implementation, noting that testing of blended fuel is ongoing.

Setting a target for sustainable aviation fuel

Earlier this year, the Centre set an indicative goal of blending 1 per cent sustainable aviation fuel (SAF) with traditional jet fuel for international flights by 2027, aligning with efforts to reduce carbon emissions in aviation. This initiative stems from recommendations by a committee under the Ministry of Petroleum and Natural Gas. SAF, with chemical properties similar to conventional jet fuel, offers a cleaner alternative to fossil-based fuels.

 

Despite the environmental benefits, industry representatives argue that high production costs associated with biofuel could significantly increase airline fuel expenses, potentially leading to higher ticket prices for consumers, the report said.

 

The report quoted an aviation sector executive saying the industry has expressed concerns over possible cost implications, suggesting that imposing a mandate may not be feasible in the current price-sensitive market.