Jet fuel costs account for 45% of air ticket prices says minister

Jet fuel costs account for 45% of air ticket prices says minister

Tamil Nadu among States with highest 29% VAT rate on ATF, he says in Parliament; more competition, aircraft will help lower rates, he adds.

The cost of aviation turbine fuel (ATF), or jet fuel, makes up 45% of the airfare, Civil Aviation Minister K. Rammohan Naidu told the Lok Sabha on Thursday, noting that some States such as Tamil Nadu charge a high 29% value- added tax (VAT) on it.

“There are some States which are charging up to 29% VAT on ATF, and Tamil Nadu is one such State which has the highest ATF in the country,” the Minister said.

While 15 States have reduced VAT on ATF to below 5%, others continue to impose higher rates, impactingairline operations and passenger fares, he added.

Mr. Naidu said the Directorate General of Civil Aviation (DGCA) monitored airfares and required airlines to submit a tariff sheet periodically. Earlier, airlines were required to submit a tariff sheet at the start of the summer and winter season, and had the liberty to change their tariffs, but they were now required to submit the tariff sheet every month and could not make tweaks to it.

His remarks in Parliament come at a time when the DGCA is examining aggregate data on airfares for the past two years submitted by airlines, following complaints of a sharp spike in ticket prices for flights to Prayagraj during the Kumbh Mela.

In response to a question from DMK MP A. Raja on why the government was not making efforts to inject more competition into the sector — an oblique reference to the duopoly with IndiGo and Air India accounting for 91% of domestic air travellers — the Minister said that more competition and more aircraft would certainly help bring down airfares. In 2014, there were 340 aircraft, which has grown to 840 now, Mr. Naidu said. Airlines also have orders for 1,700 more aircraft because of a massive demand for travel, he said, pointing out that the 10% rate of yearly growth in passengers in India was the highest in the world.