Centre plans lower ATF rates

With the new aviation policy being designed to take flying to the masses, the ministry of civil aviation is reportedly engaged in talks with the ministries of finance and petroleum and natural gas on ways of bringing down the price of aviation turbine fuel (ATF) that are almost 70-80 per cent higher than that in Gulf and SE Asian region making tickets and therefor flying expensive.

So, less than one per cent or 70 million Indians fly and government wants to take this to 300 million. The middle class can afford a fare of `2,500-`3,000 for a one hour flight, if the airfare can be brought down to this level by way of reduced taxes and subsidy support.

The government would have to either curb ATF exports or bring down sales tax. India produces around 11 million tonnes of ATF of which nearly 45 per cent is exported. “Imagine the loss of fuel in first exporting ATF and then re-importing the same, just to skirt around high state taxes,” said Amber Dubey,partner and head, KPMG, aerospace and defense.

The National Civil Aviation Policy (NCAP 2015) being drafted by ministry of civil aviation (MoCA) is expected to be released for public feedback by mid-September and finalised by end of October.

MoCA intends to create an Essential Air Services Fund for which a 2 per cent levy will be imposed on every airline ticket sold and this will be used to subsidise the small aircraft going to small airports.

There are currently around 475 airports and airstrips of which only around 75 have scheduled operations.

If ATF and subsequently ticket costs are brought down, it would boost tourism. Each tourist spends between $800-$1,000 and we get 7.4 million tourists annually arriving in India.

A reasonable long term target for India should be 70 million, nearly ten times of what it is today said Mr Dubey. Every 20 million passengers add around $20 billion to our GDP, that’s nearly one per cent of our GDP.

https://www.asianage.com/business/centre-plans-lower-atf-rates-193