New Delhi: The total burden on account of Wednesday’s imposition of a 5% customs duty on jet fuel could be around ₹ 55 crore that will have little impact on airline costs, according to a finance ministry official, who spoke on condition of anonymity.
While identifying non-essential items for imposition of duty with the aim of reducing India’s trade deficit and to support the rupee, the government also looked at domestic production capacity of the products targeted, said the official.
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India imports a significant part of its crude oil requirement, but has a strong refining industry which also exports finished petroleum products, including aviation turbine fuel. In 2017-18, India produced 14.6 million tonnes of jet fuel, about half of which was exported. Imports stood at 291,000 tonnes, a fraction of total domestic jet fuel production capacity.
“We have to look at every small measure possible to maintain the balance of payments. This is only one step in that direction," said the official.
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“Total usage of ATF is around ₹ 30,000 crore. The imports last year were worth ₹ 1,100 crore. A 5% customs duty on ₹ 1,100 crore will yield just ₹ 55 crore. It is a minuscule part of airlines’ total cost. It is not going to impact air fares," said the official.
The government on Wednesday raised import duties on 19 non-essential items, including refrigerators, air-conditioners, jewellery and diamonds, that account for annual imports worth ₹ 86,000 crore to arrest a widening current account deficit (CAD) and a weakening rupee. The measures could prove to be inadequate to support the currency in the wake of an interest rate hike by the US Federal Reserve on Thursday and possibility of a further rate hike that could result in an outflow of dollars from the country.