Ministers panel to look into airline woes

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The private airlines had recently withdrawn a strike call to protest against the high taxation on ATF and high airport charges.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.

The sales tax on ATF was zero in Andaman and Nicobar Islands, while it was four per cent in AP, Rajasthan and Maharashtra barring the cities of Mumbai and Pune which cater to most of the flight operations.

On the higher side, the sales tax rate on jet fuel was 28-30 per cent in Karnataka, Bihar, Madhya Pradesh, Tamil Nadu and Gujarat, while it was 25 per cent in Maharashtra, West Bengal and Himachal Pradesh.

In Delhi, Goa, Haryana, Jharkhand, Chandigarh and some other states it was 20 per cent, while in Jammu and Kashmir, Uttar Pradesh and Nagaland the rate stood at 21 per cent, Patel said, adding that ATF consumption had gone up from 24,84,000 metric tonnes in 2003-04 to 44,55,000 mt in 2008-09.