Indian Airlines Seek To Import Aviation Fuel To Save Tax

by Lorys Charalambous, Tax-News.com, Cyprus

01 October 2008

The Indian aviation industry is seeking government permission for domestic airlines to directly import aviation turbine fuel (ATF) in order to alleviate the cost and tax burden on the country's struggling operators.

It is believed that the Federation of Indian Aviation, which represents Indian airlines, has asked the Directorate General of Foreign Trade (DGFT) to obtain permission from the petroleum ministry for domestic carriers to import fuel directly for their own use.

Currently, airlines must buy ATF from domestic oil companies whose prices tend to be much higher than those for imported fuel. However, by importing directly, not only will airlines be able save on general fuel costs, but also on the high levels of tax levied on ATF by state governments in India.

It is thought that such a move could save the industry about 25% in fuel costs, a huge margin that could potentially bring the ailing industry back to profitability at a time when many airlines are struggling to come to terms with world economic events.

According to the International Air Transport Association (IATA), in August it was 58% more expensive to buy fuel in Mumbai (for domestic flights) than in Singapore (for international flights), with excise duties, throughput fees charged by airport operators and state taxes of up to 30% for domestic flights adding significantly to the cost base of Indian airlines.

IATA Director General and CEO, Giovanni Bisignani, warned in a recent speech that India is among the most expensive places on the planet to buy aviation turbine fuel and that the national industry is facing a total loss of USD1.5bn this year if nothing is done to address this.

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