NEW DELHI: In a major relief to Indian airlines, the Maharashtra government has cut VAT on aviation turbine fuel (ATF) from 25% to 18% at India’s second biggest aviation hub — Mumbai — along with Pune and Raigad.
The announcement was made by deputy CM Devendra Fadnavis in the state’s Budget presented on Thursday. Now India’s biggest hub — Delhi — remains among the few states that still charge very high tax at 25% on jet fuel.
Indian carriers have historically faced high operating costs primarily due to steep ATF prices — caused by high base price and then even higher state and central taxes/duties on that.
As a result, except IndiGo all other contemporary desi airlines face huge losses and require constant fund infusion from promoters or loans to remain airborne.
Barring IndiGo and until the recent entry of Tatas in the sector in a big way, other Indian carriers remain financially fragile to grow despite the huge air traffic that India — the world’s third largest domestic aviation market with a constantly rising international traffic — sees.
As a result, foreign carriers used to walk away with a lion’s share of international traffic to and from India till not so long back.
To change this and ensure financial viability in the sector, Union aviation minister Jyotiraditya Scindia has been requesting the Centre to reduce excise of ATF while pursuing states to cut VAT on the same. While several smaller states have agreed to cut taxes, the two big hubs of Delhi and Mumbai had so far remained the biggest sore points with thir high taxes. Now with Mumbai going to see lower taxes, all eyes are on when Arvind Kejriwal relents for Delhi.
“I thank Maharashtra CM Eknath Shinde and deputy CM Devendra Fadnavis ji for taking the progressive decision to reduce VAT on ATF from 25% to 18%. In a scenario of high fuel prices, this step will prove to be a catalyst in our efforts to ramp up air connectivity. With this, Maharashtra joins the league of total 19 states/UTs that have rationalised VAT rates in the last 1.5 years,” Scindia Tweeted Thursday.
“Alongside enhanced connectivity for Mumbai, Pune and Raigad, this will also make travel more affordable, and boost growth. The (Maharashtra) state government has also allocated over Rs 100 crore for development of airports in Shirdi, Chhatrapati Sambhajinagar, Nagpur and Baramati. Both the decisions will herald a new phase of growth in air travel for the state,” Scindia added.
