New Delhi (Agency): In a surprising move, India’s jet fuel prices have been jacked up by 14%, marking the steepest increase ever. The price hike came into effect on September 1, 2023, marking the third consecutive month of such increases. In contrast, rates for commercial cooking gas were cut, leading to mixed reactions among the public and industries.
The Aviation Turbine Fuel (ATF) price now stands at Rs 1,12,419.33 per kilolitre in the capital city, New Delhi. This increase of Rs 13,911.07 per kilolitre is a substantial jump that follows two previous price hikes—an 8.5% increase in August and a 1.65% rise in July. Over these three increases, the cost of ATF has surged by Rs 23,116.24 per kilolitre.
The price change varies from one state to another due to local sales tax or VAT. State-owned fuel retailers revealed that the hike is in line with “firming up of global prices” over the last couple of months.
The aviation industry in India is currently navigating through turbulent skies, largely due to the high taxes imposed on jet fuel and other operational aspects. While the Indian government recently hiked jet fuel prices by an unprecedented 14%, what adds to the burden is the high taxation that is significantly more than what airlines face in many other countries.
In India, jet fuel accounts for nearly 40% of an airline’s operational costs, exacerbated by high state-level Value Added Tax (VAT) that can go up to 30%. Additionally, the Indian government levies other charges like airport fees and service taxes, making it one of the most expensive countries for airlines to operate in.
Contrast this with countries like the United States, where aviation taxes are considerably lower. In the U.S., jet fuel is taxed at very low federal excise rate with minimal state-level taxes. European countries also offer more reasonable tax rates, making it easier for airlines to manage their costs.
Even in the Asia-Pacific region, countries like Singapore and Malaysia have implemented industry-friendly policies that have led to a boom in their aviation sectors. Singapore, often seen as a hub for international travel, imposes zero tax on jet fuel for international flights, encouraging airlines to operate more freely.
“In the last couple of months, global prices have firmed up, necessitating the hike in ATF rates,” said a representative from the Indian Oil Corporation.
India is currently experiencing a complex and unpredictable fuel pricing scenario. The implication of these high taxes is far-reaching. Air travel becomes less accessible for the common citizen, dampening domestic tourism and business travel. Airlines themselves are constrained in their ability to expand and modernize their fleets, affecting their global competitiveness.
Furthermore, high taxes have ripple effects on related industries like tourism and hospitality. The increased operational costs due to high taxes often lead airlines to cut back on routes or frequency, thereby affecting tourism-dependent states in India that rely on robust air connectivity.
