Thursday, August 13, 2009

GoM to study impact of jet fuel prices on aviation industry

A Group of Ministers (GoM) would be set up soon to study the impact of high jet fuel prices on the aviation industry and recommend measures to bring down its burden on the operational costs of the airlines.This was decided on Thursday at a meeting of the Union Cabinet, chaired by Prime Minister Manmohan Singh, where Civil Aviation Minister Praful Patel made a presentation on the health of the aviation sector.

After the meeting, Patel said the GoM, to be set up soon by the Prime Minister, would focus on the "very high nature" of sales tax being imposed on aviation turbine fuel (ATF) by various state governments as also its base price, which was "much higher" than most countries.

ATF accounts for over 40 per cent of the total operational cost of an airline in India, compared with 20-25 per cent globally. The Minister said he briefed the Cabinet on the need for additional capital infusion in Air India, which currently has an equity base of only Rs 145 crore and has ordered planes worth over Rs 50,000 crore.

He also informed the meeting about the decision of Airports Authority of India to raise funds by issuing infrastructure bonds worth Rs 5,000 crore. AAI is modernising and upgrading a large number of airports throughout India, including those in Kolkata and Chennai.

Elaborating on the need for reducing the burden of ATF, the Minister said the prices of jet fuel had increased by as much as 99.6 per cent in one year. The private airlines had recently withdrawn a strike call to protest against the high taxation on ATF and high airport charges.

Giving comparative figures, he said ATF price per kilolitre averaged between Rs 24,000 to Rs 26,000 from the entire East and Southeast Asia to Dubai, London and New York. However, its price in states like Andhra Pradesh, which had the lowest sales tax rate of four per cent, ranged between Rs 34,000 and Rs 35,000. In Delhi, it was Rs 38,000, in Mumbai over Rs 40,000 and in Kolkata Rs 46,000.

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