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Lower jet fuel prices, Patel tells FM

The civil aviation minister lobbied for lowering duties on jet fuel, in a bid to bring some relief to the country's airline industry in the upcoming budget, reports Samiran Saha.

india Updated: Jan 16, 2008 21:45 IST
Samiran Saha
Samiran Saha
Hindustan Times

Civil aviation minister Praful Patel on Wednesday lobbied for lowering duties on jet fuel, in a bid to bring some relief to the country's airline industry in the upcoming budget.

Patel met Finance Minister P Chidambaram to discuss fiscal measures that could help the aviation industry tide over the rising jet fuel prices.

Jet fuel prices have been raised seven times in the past ten months, pushing up operating costs and hitting profitability of the airlines.

That "coupled with higher central and state levies, has had serious impact on the viability and financial health of the (aviation) sector," Patel said.

Jet fuel prices in the four metro cities went up between 19 to 25 per cent during the last calendar year. For example a kilolitre of aviation turbine fuel (ATF) went up by as much as 20 per cent and costs Rs 45,492.82 in Delhi now while it was Rs 37,746.92 in January last year.

Patel said there is wide variation between prices in India and those prevailing in the global market, largely because of high taxes and duties that Indian carriers pay. ATF prices include Customs Duty of 10 per cent, excise duty of 8 per cent, and sales tax averaging around 23 per cent across the country.

"To sustain 25 per cent plus growth in the aviation sector we need a rationalised tax structure," Patel said.

State levies on jet fuel vary between 4 per cent in Jharkhand to as high as nearly 40 per cent in states like Maharashtra, Delhi and West Bengal.

Patel also asked the Finance Minister to give ATF "declared goods" status, so that they sold for the same prices across the country.

India is a net ATF exporter and oil companies in India sell the same in the overseas markets at basic prices lower than that offered in the domestic market.

Patel also sought tax benefits under section 72A of the Income Tax Act for merger and acquisitions so to facilitate ongoing consolidation in the industry.

"Mergers and acquisitions will continue to happen in the aviation market as the sector is expanding very rapidly. We should give them (other airlines that make mergers and acquisitions) a level playing field as tax benefits will help the airline industry in general," the minister said.