Financial Daily from THE HINDU group of publications
Thursday, Apr 18, 2002
IA asks other States to follow AP example on ATF sales tax
NEW DELHI, April 17
INDIAN Airlines (IA), which is likely to save Rs 9.5 crore annually due to the decision of the Andhra Pradesh Government to lower the sales tax on aviation turbine fuel (ATF) to 4 per cent, has written to several other States to follow the Andhra example.
"The airline expects to save Rs 9.5 crore annually due to the lowering of the sales tax on ATF in Andhra Pradesh. Since the State Government has taken the decision at the beginning of the financial year, there will surely be a positive impact on the bottomline of the company,'' highly placed IA sources told Business Line.
The April 9 decision of the State Government lowering the sales tax on ATF saw the price of aviation fuel plummet from Rs 18,914 per kilolitre to Rs 15,068.
IA is looking for ways to capitalise this reduction in ATF prices, which account for 30-35 per cent of the cost of operations. The airline is looking into the feasibility of operating more flights from the State, senior IA officials said.
At present, IA operates 134 weekly domestic flights and 19 weekly international flights from the three airports in the State including Hyderabad, Vizag and Tirupati. However, the airline has ruled out any reduction in fares from Andhra Pradesh for now.
Meanwhile the state-owned carrier would write to the Chief Secretaries of various States asking them to follow the Andhra Pradesh example. "IA wrote to the Rajasthan Government on lowering the sales tax on ATF from the existing level of 26.45 per cent when the Jaipur-Delhi-Dubai flight was launched,'' officials said.
While AP has lowered the sales tax on ATF from 30.55 per cent to 4 per cent, several States such as Kerala (40.25 per cent), Gujarat (36 per cent) and Karnataka (25 per cent) among others still continue to charge a high rate of sales tax on ATF.
Ministry sources, however, indicated to Business Line that Karnataka might follow the lead set by Andhra Pradesh. This will primarily be because of the Budget statement of the Finance Minister, Mr Yashwant Sinha. He offered a host of concessions to encourage private sector participation in greenfield airport projects like those coming up in Hyderabad and Bangalore.
The concessions included exemption from levy of Inland Air Travel Tax (IATT) Foreign Travel Tax (FTT) on departing passengers for projects located in States that charge sales tax on ATF at Central sales tax rate of 4 per cent.
Meanwhile, IA has seen a steady increase in the daily passenger loads. IA officials said the airline was carrying between 17,000-to-18,000 per day on its flights. "There have also been several days when the passenger carried by the airline has crossed 19,000," officials said.
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