You may have to shell extra on airfares this festive season. Here's why

Planning to book air tickets during the festive season? You may have to pay extra on your air travel as airlines are expecting that oil marketing companies (OMCs) may go for a hike in aviation turbine fuel (ATF) prices as the government on Wednesday raised custom duties to 5 per cent on 19 items including the jet fuel - the costliest in India for domestic flights. With this move, airlines are likely to pass on higher costs to passengers as peak travel season is around the corner.

Domestic airlines are already struggling with rising fuel prices, stiff fare competition, and declining rupee. With government’s decision to impose 5 per cent customs duty (which was nil earlier) on ATF which is one of the crucial components of airline’s operational costs, the airlines companies would be compelled to increase the air ticket prices. 

In order to curb the widening current account deficit (CAD), depreciating rupee and rising oil prices, the central government has decided to take tariff measures by announcing the hike in customs duties on import of at least 19 products. In recent weeks, the airline industry has indicated that air ticket prices could go up in October when the peak travel season begins.

It is expected that the 5 per cent hike would result in a minimum surge in monthly fuel bill by Rs 250 million for airlines. This may further affect the profits of the domestic carriers already struggling to stay cost-effective. Facing with mounting prices, Indian airlines have been seeking a decrease in taxes and duties related to the aviation sector.

The Finance Ministry took the decision yesterday where it declared that customs duty has been hiked on 19 items that accounted for an import bill of Rs 860 billion in FY18 to the tune of 2.5 per cent-10 per cent. 

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With inputs from The Economic Times