New Delhi: Two days before the revision of aviation turbine fuel (ATF) prices, the airline industry has issued an urgent appeal to the central government, seeking immediate intervention on fuel pricing. While commercial carriers received a temporary reprieve last month with a cap on domestic flight base price hikes at 25% and international flights seeing more than double the increase, the Federation of Indian Airlines (FIA) — representing Air India, IndiGo, and SpiceJet — is now proposing tax reductions to curb price surges amid soaring global oil prices.
Proposed Measures to Address ATF Costs
The FIA has recommended rational pricing of ATF, a temporary suspension of the 11% excise duty on ATF for domestic operations, and reduction of Value Added Tax (VAT) rates in key states. The lobby group highlighted that India's largest aviation hub, Delhi, imposes the second-highest VAT at 25%, with Tamil Nadu leading at 29%. Other major hubs like Mumbai, Bangalore, Hyderabad, and Kolkata have VAT rates ranging between 16% and 20%. These six cities collectively account for over 50% of airline operations within India. The FIA emphasized the need for urgent intervention to review ATF cost challenges to ensure uninterrupted airline operations.
Impact on Airline Operations
ATF previously constituted 30-40% of an airline's operational costs, but this share has surged to 55-60% following the price hike in April, creating what the FIA describes as completely inoperable conditions. A weaker rupee has further compounded cost pressures. The FIA letter stated, "Airlines are in a very difficult, precarious, and challenging situation. Airlines have been managing operations till date despite rising costs and additional expenses due to airspace closures. To survive, sustain, and continue operations, we request urgent intervention for immediate and meaningful financial support."
Disparity in Fuel Pricing
The FIA pointed out that while other fuels like diesel and petrol have price control mechanisms, ATF lacks such regulation, resulting in prices significantly higher than production costs. ATF accounts for only 4% of India's refinery production. Of this, domestic airlines consume just 30%, international carriers use 20%, and the remaining 50% is exported. The association warned that high ATF prices "will result in insurmountable losses for airlines and lead to grounding of aircraft, resulting in cancellation of flights."
