Govt scraps customs duty on aviation fuel, export duty on steel

Govt scraps customs duty on aviation fuel, export duty on steel

New Delhi: In an attempt to bail out the aviation and steel industries, and keep its part of the bargain, the Congress-led United Progressive Alliance (UPA) scrapped the basic customs duty of 5% on jet fuel and withdrew the export duty on steel products, except scrap, on Friday.

The government had earlier agreed to a rationalization of jet fuel duties if the country’s airlines did not resort to layoffs to protect their profits. The government is proactively seeking to mitigate the fallout of the international economic crisis on domestic companies. As part of this effort, Prime Minister Manmohan Singh has invited corporate leaders to a meeting on Monday.

“Though there are no imports of ATF (aviation turbine fuel) and it is a freely priced petroleum product, the price of domestically produced ATF is based on import parity price factoring in the basic customs duty. The exemption would result in lowering of the base price of ATF and, consequently, lowering the incidence of excise duty and VAT (value-added tax), giving substantial relief to the aviation sector," the finance ministry said in a statement. Jet fuel accounts for around 45-55% of the operating costs of airlines in India.

Mint had reported on the government’s move to rationalize jet fuel and steel product levies on 17 October and 18 October, respectively.

Oil marketers are expected to cut jet fuel price by Rs6,000 per kl. Together with the new duty structure, this would result in a further fall in its rate.

“Though we have not calculated exact savings, we may reduce our cost by 6-7%," said Parthasarathi Basu, chief financial officer, SpiceJet Ltd. “At this point of time we have no plans to review the fare structure or surcharge. First of all, we have to make profit," said Wolfgang Prock-Schuaer, chief executive officer, Jet Airways (India) Ltd.

Similarly, the government’s decision to withdraw export duties will make Indian steel exports more competitive internationally. It also replaced the 15% ad valorem (according to value) export duty on iron ore fines with a specific duty of Rs200 per tonne. Iron ore is traded in lumps or fines.

The steel products include pig iron, iron and steel ingots, bars and rods, angles shapes, sections. The government also imposed a 5% customs duty on ferro-molybdenum and ferro-vanadium to protect the domestic industry.

P.R. Sanjai of Mint and PTI contributed to this story.