Union civil aviation minister Praful Patel on Friday asked state governments to review and rationalize their taxation policies on jet fuel and land acquisition to encourage expansion of the civil aviation sector. “States must not look at aviation as a milch cow. There is cut-throat competition in this sector. Airlines are losing money, mainly because of competition and high taxes,” Patel said, while addressing the first National Civil Aviation Conference.
The tax burden on aviation turbine fuel (ATF) ranged from 4% to 34%, Patel said. He specifically mentioned Maharashtra, Delhi, Kerala, Tamil Nadu, Andhra Pradesh, West Bengal and Goa among states with high rates of taxes on jet fuel.
ATF comprises 35-40% domestic airlines’ total operating costs. The minister asked the states to compare their collection from these taxes in 2004 and now, primarily due to the hike in global oil prices and increase in the number of flights, and asked them to pass on some benefit to the airline industry.
He said if the taxes, particularly the state sales tax, were rationalized, then it would encourage more airlines to fly into a state, leading to creation of aviation as well as tourism infrastructure, which would create jobs and income through a multiplier effect.
Union civil aviation minister Praful Patel. (Madhu Kapparath / Mint)
The minister also pointed out that no public sector unit (PSU) under his ministry got budgetary support from the Centre. “Except for equity in AAI (Airports Authority of India), Air India and some funds for a few airports in the North-east, these PSUs do not get any financial support,” he said.
On the issue of land acquisition, Patel said while AAI and other agencies would help develop airports, it was now the prime responsibility of state governments to provide land for the new ones as well as for expanding the existing ones.
Some states said they would consider Patel’s suggestions.
M.Vijayakumar, Kerala’s minister for law, sports and youth affairs, who was present at the conference, indicated that his government was considering reduction in sales tax on ATF. The minister in-charge of airports in Andhra Pradesh, Venkata Ramana Rao Mopedevi, said discussions in this regard were being held “at the chief minister’s level”.
Maharashtra secretary (special projects) Sanjay Ubale said he would raise the concerns expressed by the civil aviation minister with the state government.