Rationalisation of taxes on aviation turbine fuel (ATF) can stimulate air travel by about nine per cent, Centre for Asia Pacific Aviation (CAPA) has said in its report titled ‘Maximising the contribution of aviation to the Indian Economy’.
The report, commissioned by Tata-SIA Airlines Ltd, holds that abolition of sales tax will reduce ATF cost by 20 per cent and operating costs of an airline by seven per cent. Assuming that the reduction in cost is transferred to consumers, the consequent reduction in air fares can stimulate air travel demand by around 8-9 per cent, the report states.
ATF accounts for 30-35 per cent of an airline’s operating cost. The cost of jet fuel is 45 per cent more expensive in India compared to neighbouring economies.
CAPA in its report also mentions about the need to abolish the ‘5/20 rule’ to improve operational efficiencies in the airline business.