AP cuts jet fuel tax 90%, forcing states to follow

Will  recover losses  from rise in traffic

SHAMSABAD: In a move that puts pressure on other states, Andhra Pradesh has cut sales tax on aviation turbine fuel (ATF) from 33% to 4% -- a reduction of nearly 90%.

Airlines, which have been reeling under cost issues, have been lobbying for such a step.

“It will cost a loss of revenue of around Rs 50 -60 crore to the state,” said chief minister Y S R Reddy, after the first landing of a jetliner at the new Hyderabad airport.

Andhra Pradesh has traditionally been one of the states levying the maximum amount of sales tax on ATF.

Reacting to the move, Union civil aviation minister Praful Patel said, “This is a good start.”  Maharashtra levies 25% on the fuel.

He expressed the hope that Budget 2008- 09 would see ATF getting the ‘declared good’ status.

Such a step would automatically result in all states levying a uniform tax rate of 4% on jet fuel. Patel also said that the loss in revenue could be more than made up by the increase in traffic and tourism.
 
India’s air carriers pay around 70-80% more for fuel as compared to their international counterparts due to the various taxes and levies on ATF. The state taxes range between 4%-38% in different parts of the country. Airlines claim that their balance sheet is taking a bad hit with fuel accounting for more than 45% of their expenses.

Earlier, a Kingfisher Airlines A320 touched down on the nation’s longest runway at 3.14 pm in a test flight which marked the first instance of an airliner landing in the greenfield airport developed by Hyderabad-based GMR.