- The Modi government is reviewing measures to mitigate rising ATF prices from April 1
- Higher global crude prices due to Iran conflict are driving up ATF costs for airlines
- The Civil Aviation Ministry plans to urge states to reduce VAT on jet fuel to lower costs
The Modi government is assessing multiple measures to contain the impact of a likely rise in Aviation Turbine Fuel (ATF) prices from next month, driven by higher global crude oil prices, top government sources told NDTV Profit.
According to sources, the expected upward revision in ATF rates from April 1 could put pressure on airlines and, in turn, airfares. The government is therefore trying to balance the interests of all stakeholders — airlines, passengers and airport operators — while exploring ways to minimise the impact of elevated crude oil prices.
Global crude oil prices have surged over 50% since the outbreak of the Iran war. Supply curbs due to the conflict and the virtual blockade of the Strait of Hormuz has contributed to higher prices. India is a net exporter of ATF given its strong refining capacity.
The Ministry of Civil Aviation is currently in discussions with various government stakeholders to evaluate possible interventions. One of the key steps under consideration is engaging with state governments to reduce the value-added tax levied on jet fuel, which forms a significant portion of airline operating costs.
Sources indicated that Aviation Minister Kinjarapu Ram Mohan Naidu is likely to write to Chief Ministers of states, urging them to consider lowering VAT on ATF. In addition, the ministry plans to formally reach out to state finance departments on the same issue.
ATF prices at metro airports have historically been higher compared to non-metro locations due to elevated state taxes and other charges. In this context, states and Union Territories such as Maharashtra and Delhi have been specifically flagged as regions that should consider reducing VAT on ATF to ease cost pressures on airlines.
The government is also examining multiple policy options to ensure that airlines are not forced to pass on higher fuel costs to passengers through increased airfares. Sources said the overarching objective is to prevent a sharp rise in ticket prices.
As part of this broader effort to provide passenger relief, the Civil Aviation Ministry is also considering lowering certain airport-related charges. Discussions are being planned with airport operators to review existing levies and fees, which could potentially be rationalised to offset higher fuel costs.
Sources emphasised that the government's approach is holistic, with parallel dialogues underway across ministries, state governments and airport operators, as it seeks to stabilise the aviation sector amid global crude oil volatility.
ALSO READ: Government Imposes Levies On ATF Amid Excise Changes; Cuts Fuel Duties — Check Exemptions
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
