Airlines to reduce fares only after fuel tax cut

November 26th, 2008 - 3:41 pm ICT by IANS  

New Delhi, Nov 26 (IANS) Indian carriers are unlikely to cut fares until the government brings aviation turbine fuel (ATF) under the declared goods category to make the commodity attract an uniform sales tax of 4 percent across the country.Aviation fuel is currently taxed between 4 and 35 percent depending on the rates applicable in various states.

Finance Minister P. Chidambaram earlier this week announced that a bill will be introduced during the forthcoming Parliament session - scheduled to begin early next month - to bring aviation fuel under the declared goods category.

The matter is likely to be brought before the Cabinet later this week.

But airlines are not very hopeful if the government would be able to do so as states have opposed lowering of taxes on aviation fuel as they would lose revenues.

“We will wait till the bill concerning change in category for aviation fuel is cleared in the parliament. But many states are opposed to it. This is one reason why we have not cut fares despite FM’s assurance,” a senior airline official told IANS on condition of anonymity.

Early this year, the Centre urged states to cut taxes on aviation fuel but only few states such as Kerala and Maharashtra responded to it.

The chairman of Kingfisher Airlines, Vijay Mallya, late Monday night issued a statement stating that Kingfisher would reduce airfares “across the board” as soon as the government brings aviation fuel under the declared goods category.

“Kingfisher will immediately reduce airfares across the board as soon as the declared goods classification is approved for aviation fuel,” the statement said.

State-owned carrier Air India is also considering a further cut in fuel surcharge by 10-12 percent following a plea from civil aviation minister Praful Patel last week. However, the cut will be implemented only in December, airline officials said.

The aviation industry has for long been demanding a cut in taxes on aviation fuel. A passenger flying on any domestic route in India currently pays over Rs.3,500 as fuel charges including tax.

State-run oil companies slashed ATF prices Nov 15 by 12 percent, bringing down the price to Rs.39,767 per kilolitre compared with Rs.41,417 per kilolitre earlier. With this reduction, jet fuel prices are now at par with levels that prevailed in September last year.

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