The Centre has asked state governments to slash value added tax (VAT) on jet fuel to 4 per cent to provide succour to cash-strapped airline industry,which posted a combined loss of over Rs 9,700 crore and had a total debt burden of Rs 87,779 crore in 2012-13.
It also wanted the states to take steps like reducing property tax on airports,provision of security,power and water supply and road connectivity,to encourage development of air traffic in tier-II and III cities and far-flung areas.
At a day-long conference of state civil aviation ministers,representatives of states wanted the Centre to share the cost of developing airports in tier-II and III cities and ensure a minimum number of flights to non-metro and remote destinations,among other things.
Observing that the prime reason for airline losses was high fuel cost which constituted 40-50 per cent of an airlines total costs,civil aviation minister Ajit Singh said the aviation turbine fuel (ATF) prices were high due to rising base price and very high VAT imposed by state governments,which currently ranged from 4 to 30 per cent.
He said states like Madhya Pradesh,Chhattisgarh,Jharkhand West Bengal have recently reduced VAT.
Lowering of VAT on ATF by Chhattisgarh has led to a six-fold increase in ATF uplift and brought in more flights to Raipur. Singh also said reducing VAT on ATF to 4 per cent would also lead more people to take to air travel and provide considerable spinoffs to the economy.