Niti Aayog asks govt to reduce excise on jet fuel

Niti Aayog has recommended to the government to cut excise duty on jet fuel to bring down high cost of flying, especially through metropolitan airports.

“Align excise duties on aviation turbine fuel to international levels to bring down its cost. On average, ATF accounts for about 40% of airlines’ total costs, making up the majority of airlines costs,” the Centre’s policy think tank said in its next three years agenda.

The agenda was sought by Prime Minister’s Office.

Jet fuel costs are among the world’s highest in India.

“The high cost is exacerbated by a host of duties and taxes. Airlines pay an excise duty of 14% and a VAT ranging between 5% and 30%. Thus, the total effective tax on jet fuel is between 19% and 44%,” the Three Year Action Agenda 2017-18 to 2019-20 said.

The Aayog also sought to reverse the new civil aviation policy that proposes to extend the hybrid till model for determining airport charges to state-run airports, saying it will raise costs for airlines and passengers.

Currently, Public Private Partnership (PPP) airports in India –Delhi, Mumbai, Bengaluru and Hyderabad – operate under a hybrid till mode, where aeronautical revenue (landing, parking and ground handling) and a share of the non-aeronautical (duty free shops, hotels, restaurants and airport infrastructure) revenue are used to determine tariffs.

In contrast, Airports Authority of India (AAI) airports operate under a single till structure where all revenues – aeronautical and non-aeronautical – determine tariffs.

The Ministry of Civil Aviation has mandated that all airports now move from a single to a hybrid till structure.
Conventionally, a single till structure is associated with lower tariffs.