The Centre on Tuesday asked state governments to slash value added tax (VAT) on jet fuel to four per cent to provide succour to cash-strapped airline industry, which posted a combined loss of over Rs 9,700 crore and had a total debt burden of Rs 87,779 crore in 2012-13.
It also wanted the states to take steps like reducing property tax on airports, provision of security, power and water supply and road connectivity, to encourage development of air traffic in Tier-II and III cities and far-flung areas.
At a day-long conference of State Civil Aviation Ministers here, representatives of state governments wanted the Centre to share the cost of developing airports in Tier-II and III cities and ensure a minimum number of flights to non- metro and remote destinations, among other things.
Observing that the prime reason for airline losses was high fuel cost which constituted almost 40-50 per cent of an airline's total costs, Civil Aviation Minister Ajit Singh said the aviation turbine fuel (ATF) prices were high due to rising base price and "very high VAT imposed by state governments", which currently ranged from 4 to 30 per cent.
In 2012-13, the airlines posted a combined loss of Rs 9,779 crore and had a total debt of Rs 87,779 crore, official figures showed.
Addressing the conference, he said states like Madhya Pradesh, Chhattisgarh, Jharkhand West Bengal have recently reduced VAT, "I thank them and hope others would also oblige".
Lowering of VAT on ATF by Chhattisgarh has led to "a six -fold increase in ATF uplift" and brought in more flights to Raipur. "So my request to you all will be that you should take up with your government to reduce VAT on ATF to four per cent" which would also lead more people to take to air travel and provide considerable spinoffs to the economy, Singh said.
A "flawed perception" that aviation belonged to the elite only, has resulted in the sector "bearing the cross of high tax regimes and eliciting less sympathy from policy makers," he said.
On airport development in Tier-II and III cities, Singh said the government has decided to operate, manage and develop 20 airports across the country, including Chennai and Kolkata, through public-private partnership.
While Requests for Qualification (RFQs) for Chennai and Lucknow have already been issued, RFQs for Kolkata, Jaipur, Ahmedabad and Guwahati "are in the process and will be out this week," the Minister said.
Participating in the discussion, A & N Island's Lt Governor A K Singh asked the Centre to ensure more flights to the islands, saying despite zero VAT on jet fuel, one-way airticket prices in peak seasons went over Rs 25,000.
Similar was the plea from states like Punjab, Rajasthan and Madhya Pradesh, with an official from Uttarakhand also wanting the Centre to create a separate heliport division in the Airports Authority of India to encourage chopper operations.
Kerala and Karnataka governments urged the Centre to share the costs of developing airports, with the former also asking airlines to assure that reduction in VAT would lead to a decline in airfares.
Officials from states like West Bengal and some Northeastern states sought night-landing facilities, while Jharkhand government suggested waiving night-parking for non-scheduled operators. The representative of Uttar Pradesh government wanted the Centre to make flying rules more realistic and user friendly.