The country’s airline industry is currently going through a very critical phase. The ‘Federation of Indian Airlines’ (FIA), which includes major airlines like IndiGo, SpiceJet, Air India and Go-First, has written a letter to the government regarding the crisis. Companies say that if the government does not intervene immediately, the operations of many airlines in the country may come to a complete halt.
The biggest problem for airlines is the rising prices of ATF (Aviation Turbine Fuel). Recently, due to increase in crude oil prices in the international market, ATF prices in India have increased by 50%. Of the total cost of running any airline, 40% to 50% is spent on fuel alone. Companies say that oil has become so expensive that now flying flights is out of their budget.
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Cities hit by heavy VAT
The VAT (Value Added Tax) charged on aviation fuel is very high in big cities of the country. According to FIA, Delhi, which is the largest aviation hub in the country, charges 25% VAT. This rate is highest in Tamil Nadu at 29%. In cities like Mumbai, Bengaluru, Hyderabad and Kolkata it ranges between 16% to 20%. Since these six cities together are responsible for the operations of more than 50% of the airlines in the country, the high taxes here are breaking the back of the companies.
It states that only 4% of refinery production in India is aviation fuel (ATF). Of this 4% fuel, only 30% is used by domestic airlines and 20% by international companies. The remaining 50% fuel is exported. Airlines argue that there is no price control system for ATF like diesel and petrol, keeping its prices well above the cost of production.
fall of rupee
The ongoing war in West Asia and the falling value of the rupee against the dollar have worsened the situation. Airlines have to make their major payments in dollars and due to the weak rupee their expenses have increased manifold. FIA says that due to the closure of the airspace and increasing operating expenses, the companies were managing somehow but now the situation has gone out of control.
Direct impact on connectivity
If the government does not temporarily remove the 11% excise duty on fuel and does not provide financial assistance, then companies will have to ground their planes. The result will be that flights will be canceled and the remaining tickets will become so expensive that it will become impossible for the common man to travel by air. Also, due to the loss, connectivity of small cities may also be completely lost.
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appeal to the government
FIA has clarified in a letter to Civil Aviation Secretary Sameer Sinha that there is no time left to ‘wait’. He has demanded from the government to immediately take ’emergency intervention’ to save the aviation sector, so that the country’s economy and thousands of jobs can be saved.
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