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India's Civil Aviation Minister: 'Reduced VAT on ATF can be a game changer', urges 4% reduction

11-Sep-2013 10:42 AM

India's Civil Aviation Minister Ajit Singh, while addressing the Conference of State Aviation Ministers and Secretaries of the State Governments, stated (10-Sep-2013) that with the recognition that civil aviation is a growth engine for economic development, it is "time that Central Government and State Governments join hands together and let the sector soar into greater heights". He said the Conference was a “beginning of a fruitful and mutually beneficial partnership bringing synergy in efforts.” Highlighting the causes of losses to the airlines, Mr Singh said, “One of the major reasons for the economic losses of the airlines is the high cost of ATF, which constitutes 40-50% of the operational cost of all domestic carriers. Compared with our neighbouring hubs, ATF prices in India are 50-60% costlier. This is mainly due to the high base price of ATF topped up by the very high ad valorem VAT imposed by state governments.” The Civil Aviation Ministry has taken this up with the Ministry of Petroleum and state governments, noting that "some states have responded positively". He explained that Jharkhand has reduced VAT on ATF to 4%, Madhya Pradesh has agreed to reduce it to 23% at Indore and Bhopal and 13% at other airports. West Bengal has agreed to reduce it with certain conditions. The Minister said, “The reduced VAT on ATF can be a game changer for the states also as seen in the case of Chhattisgarh. Chhattisgarh had reduced VAT on ATF to 4% in 2010 and it has since seen six-fold increase of ATF uplift from Raipur and an increase in number of flights from Raipur from 8 to 18 per day. With more people travelling to the state, there has been considerable spin-off effects to the economy.” He made a request to the representatives of the state governments to reduce VAT on ATF to 4%. This would significantly reduce operational expenses of the airlines leading to reduced fares and more passenger traffic, he explained.   [more - original PR]