The civil aviation industry in India is one of the most competitive business models in the country. Although there are many factors that contribute to the success of an airline, one of the most important is the aviation turbine fuel or ATF, or simply jet fuel, factor.

Maharashtra cuts VAT

In a recent development, the Maharashtra government has decided to reduce the tax or Value Added Tax (VAT) on jet fuel. VAT on said jet fuel has been reduced to 18%. Earlier, the tax rate on essential fuels was 25 percent.

The change is being attributed to the relaxation of the airline business and the intention to promote civil aviation. This comes at an important time, as the aviation industry has in the past expressed its dissatisfaction with the cost of the commodity.

It should be noted that globally airlines spend about 18-19% of their total expenditure on jet fuel. Meanwhile, for Indian airlines, the figure is said to be much higher, as in this part of the world, nearly 40 percent of airline costs are for jet fuel.

Maharashtra is also an important component in this case, it is the most industrialized in the country and the state also has two major cities Mumbai and Pune.

Mumbai handles 14% of India’s air traffic.

In fact, the country’s business capital, as Mumbai is often dubbed, reportedly handled 14 percent of the country’s international and domestic traffic in 2023.

Increased procurement costs can easily make an airline’s operations financially burdensome.

If the reduction and reduction benefits are passed on to the general consumer, it could potentially lead to a reduction in ticket prices, thereby making air travel cheaper in the country. This will be in line with the central government’s aim to make air travel affordable.

Published: Monday, June 10, 2024, 09:46 AM IST