Panel to help combat aviation fuel price rise

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New Delhi, June 11

The Government will set up an inter-ministerial group headed by the Union Cabinet Secretary to find solutions to combat price rise in aviation turbine fuel (ATF), which is affecting the profitability of the domestic airline industry.

This was decided at a meeting that Prime Minister, Dr Manmohan Singh, had with a delegation of airline chief executives here on Wednesday. The delegation was led by the Civil Aviation Minister, Mr Praful Patel. While the committee will be in place in the next few days, no timeframe has been set for it to submit its report, a senior Government official said.

Briefing newspersons, Mr Patel said the Ministry will make a presentation on States lowering sales tax on ATF on June 16 to the Empowered Committee of the State Finance Ministers on VAT. Sales tax varies from 3 per cent to 30 per cent around the country and States garner close to Rs 5,000 crore annually from taxes levied on ATF. On the other hand, the domestic industry is expected to post a loss of about Rs 4,000 crore during the current year, mainly on account of high cost of ATF.

Mr Patel is also planning to meet the Finance Minister to discuss other steps such as asking oil companies to lower the ATF base price and asking airports to reduce navigation and other charges that can lessen the airlines' financial burden. While ATF accounts for 45-50 per cent of operating costs, navigation charges account for 5-6 per cent.

Asked whether the Government would be able to convince non UPA-led States to lower taxes on ATF, Mr Patel said that the financial health of the sector concerned the entire country. "The International Civil Aviation Organisation (ICAO) estimates every $100 spent on air transport produces benefits worth $325 and every 100 jobs result in 610 more," the Minister said.

The meeting was called in the background of ATF prices having risen from Rs 21 a litre in 2004 to over Rs 70 a litre currently, while the average fare had declined from Rs 6,050 in 2004 to Rs 3,950 during 2007.

Taken from Business Line

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