In an effort to bail out ailing airline companies, the government on Friday abolished the 5 per cent customs duty on aviation turbine fuel that will have a direct impact on domestic ATF prices.
“The aviation sector is experiencing financial stress, which is partly due to high price of ATF,” the official statement said. “In order to give relief to this sector, the basic customs duty of 5 per cent has been abolished.”
Oil companies have already announced a cut in jet fuel prices by 16 per cent from Saturday.
ATF prices in India are currently 60-70 per cent higher than the international prices and constitute about 40 per cent of the cost of airlines. High crude prices in the past six months led to a substantial jump in ATF prices, which ate into the profitability of all major airlines in India.
Civil Aviation Minister Praful Patel welcomed the decision: “I thank the finance minister for taking such a proactive stance. Such initiatives will help the sector and benefit the passengers in the long run.”
Duty cuts were also announced in steel and iron ore with export duty being withdrawn on steel items. The 15 per cent ad valorem export duty on iron ore fines was replaced by a Rs 200 per metric tonne specific duty.
But it is not likely to have any major impact. “There are no buyers for iron ore in the international market right now and merely changing the export duty from ad valorem to specific is not going to solve the problem,” said R.K. Sharma of the Federation of Indian Mineral Industries.