Taking forward the proposal of the Ministry of Civil Aviation, in a bid to incentivise airlines for flying to remote areas, including the Northeast, the Delhi government, in its budget proposal, announced to cut the VAT on Aviation Turbine Fuel (ATF) from the existing 25 per cent to 1 per cent for flights bound for remote areas.
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Presenting the Delhi budget for 2017-18, Deputy Chief Minister Manish Sisodia said the cut in VAT on ATF will be applicable for direct flights between Delhi and remote areas identified under the Regional Connectivity Scheme (RCS) as per prescribed conditions.
The aviation ministry had last month sought a cut in the levy on jet fuel for flights under its new RCS, which constitutes over 40 per cent of an airline’s operating costs. Under the scheme, the government had asked state governments to reduce VAT to 1 per cent on jet fuel for regional flights. The revenue loss on account of the cut will be notional as there is no RCS flight touching Delhi currently.
Under the RCS, airlines will offer fares at Rs 2,500 for an hour’s flight. Airlines said the cut in duty would provide an impetus to regional connectivity. “I understand that this relief is only for the Regional Connectivity Routes. While this is a welcome move and will provide the much-needed impetus to the RCS, we do request that this tax break is broadened to all air travel out of Delhi as it will allow IndiGo to provide even more affordable air travel to millions of our customers out of Delhi, which is our biggest base of airplanes,” Aditya Ghosh, president and whole-time director, IndiGo, said in an earlier statement.
Industry players said the move is likely to reduce the fares on remote routes. “This is a welcome move, which will help reduce costs and, in turn, help bring down fares for flights to smaller airports in the country. We support all initiatives that help reduce fares for our consumers,” said Ajay Singh, CMD, SpiceJet. Even Sisodia said the decision will benefit people from Northeast and other remote areas.