'Please bring down VAT on ATF': Aviation minister Scindia to states charging high tax on fuel

The civil aviation minister was in form at the state Civil Aviation Ministers’ conference on Tuesday in New Delhi. After touching upon the themes of the rapid recovery being witnessed in airline traffic and significant enhancement in regional traffic achieved through the Ude Desh Ka Aam Nagrik-Regional Connectivity Scheme (UDAN-RCS), he turned his attention to the high cost of the aviation turbine fuel (ATF).

The minister opined that despite the achievement of the UDAN-RCS scheme, the cost of ATF continued to be a challenge. He said that when he and the minister of state (MoS) Gen (Retd) Vijay Kumar Singh took charge in 2021, only 12 states and union territories were charging a low VAT of 1-4 per cent on the fuel, while the rest were taxing it at a steep 20-30 per cent.

“On our request, another 16 states reduced the VAT on ATF to join the ranks of the other 12 states. Today, 28 states tax the fuel at 1-4 per cent,” said Scindia.

He thanked the governments of Andaman & Nicobar, Mizoram, Tripura, Haryana, Manipur, Arunachal Pradesh, Uttar Pradesh, Ladakh, Jammu & Kashmir, Uttarakhand, Himachal Pradesh, Dadra Nagar Haveli and Daman & Diu, Madhya Pradesh, Jharkhand, Gujarat and Karnataka for responding to the Ministry of Civil Aviation’s call.

He then proceeded to request the remaining eight states to also follow suit.

“Only when you bring down your barriers to entry [tax on ATF], will you be able to proliferate civil aviation activities in your states. I would especially like to request the governments of Goa, Assam, Maharashtra, West Bengal, Delhi, Rajasthan, Bihar and, finally, the government of Tamil Nadu to do so,” stated Scindia.

“Today, you eight states are like islands. Please bring down the VAT on ATF from 20-30 per cent to join the ranks of the other 28 states. And if you do that, it will be our responsibility to increase connectivity to your states,” he added.

The Russian military action in Ukraine and other geopolitical uncertainties had led ATF prices to climb to all-time highs. In the last 18 months, ATF prices increased from Rs 53,000 per kilolitre to rise to almost Rs 1,40,000 lakh per kilolitre. Although prices have declined by up to 20 per cent in recent months, they continue to put pressure on the cost structure of an airline with the result that jet fuel presently accounts for anywhere between 45-50 per cent of an airline’s total operating cost.

ATF price stood at Rs 1,15,520 per kilolitre for domestic carriers in New Delhi on Tuesday. 

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