Excise duty on jet fuel increased to 14%

Fliers may feel the pinch while booking air tickets with the government on Monday proposing a six per cent excise duty hike on jet fuel, but the aviation sector can cheer about the plan to revive unserved airports and exemptions for MRO industry.

Air India may also feel glum for the decrease in government investment in the national carrier, while the Civil Aviation Ministry would complain of about the slump in allocation by 23 per cent from Rs 3,341.50 crore to Rs 2,590.68 crore.

On one hand, the airfare may increase, while international passengers can look forward to some ease with the simplification of customs baggage rules to increase the free baggage allowance. The filing of baggage declaration will be required only for those passengers who carry dutiable goods.

Outlining government’s plans for the sector in the budget, Finance Minister Arun Jaitley said the government would partner with state governments to develop unserved airports at an indicative cost of Rs 50 crore to Rs 100 crore each. There are about 160 airports and airstrips with state governments.

“We will partner with state governments to develop some of these airports for regional connectivity. Similarly, 10 of the 25 non-functional air strips with the Airport Authority of India will also be developed,” Jaitley said.

The excise duty on aviation turbine fuel (ATF) would increase from eight per cent to 14%, which could mean that airlines may pass this on to the customers by increasing airfare.

 However, there will be no increase in excise duty hike on jet fuel supply to Scheduled Commuter Airlines from the regional connectivity scheme airports and it would remain at existing eight per cent.

In good news for maintenance, repair and overhauling (MRO of aircraft) sector, exemption from excise duty is being extended to tools and tool-kits when procured for aircraft subject to a certification by the Directorate General of Civil Aviation (DGCA).

The government investment in civil aviation sector has also come down to Rs 4,417 crore from the previous allocation of Rs 5,360.95 crore and actual spending of Rs 6,305.89 crore.

One of the main victims is Air India, which has been allocated only Rs 2,065 crore as against previous allocation of Rs 3,205 crore and actual investment of Rs 4,200 crore.