Major Indian airlines including Air India, IndiGo, and SpiceJet have urgently appealed to the government for a reduction in Aviation Turbine Fuel (ATF) prices, warning that the industry is on the verge of halting operations. The carriers cited soaring fuel costs as a critical threat to their financial viability, with ATF accounting for over 40% of their operational expenses.
Industry Plea for Government Intervention
In a joint representation to the Ministry of Civil Aviation and the Ministry of Petroleum, the airlines highlighted that the current ATF prices are unsustainable. They have requested a reduction in excise duty and state-level VAT on ATF, as well as inclusion of ATF under the Goods and Services Tax (GST) regime to bring uniformity and lower costs. The airlines argue that without immediate relief, they may be forced to reduce flights or even suspend operations, which would disrupt travel plans for millions of passengers and impact the broader economy.
Impact of High ATF Prices
The rise in global crude oil prices, coupled with high taxes, has pushed ATF prices to record levels. Domestic airlines have been struggling to recover costs despite a rebound in passenger traffic. The industry has already witnessed several airlines shutting down or scaling back operations in recent years. The current crisis could lead to further consolidation, job losses, and reduced connectivity to smaller cities.
- Excise Duty Reduction: Airlines are seeking a cut in central excise duty on ATF from the current 11% to lower levels.
- State VAT Reduction: They have also urged states to reduce VAT, which varies from 1% to 30% across states, to a uniform low rate.
- GST Inclusion: The industry has long demanded the inclusion of ATF under GST to eliminate cascading taxes and allow input tax credit.
Government Response
The Ministry of Civil Aviation has acknowledged the concerns and is in discussions with the Ministry of Finance. However, any decision on tax cuts may be challenging given the government's revenue needs. The airlines have warned that without swift action, the sector may face a severe crisis similar to the aftermath of the COVID-19 pandemic.
In the meantime, carriers are exploring measures such as fuel hedging, fleet modernization, and operational efficiencies to mitigate the impact. However, they stress that these steps alone are insufficient to offset the burden of high ATF prices.
The plea comes as the summer travel season approaches, with airlines expecting high demand. Any disruption in operations could have a significant impact on tourism and business travel. The industry is hopeful that the government will consider their request to ensure the sustainability of the aviation sector.
