The Hindu : No ATF taxes, duties for foreign aircraft

Online edition of India's National Newspaper
Friday, May 17, 2002

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No ATF taxes, duties for foreign aircraft

By Our Special Correspondent

New Delhi May 16. Parliament today passed a Bill to exempt foreign aircraft from paying taxes and duties on aviation turbine fuel (ATF) and lubricants, even as members in the Rajya Sabha sought an assurance from the Government that the States would be "compensated" for waiving taxes. The members were unanimous in their demand that the Centre start consultations with the States on rationalisation of taxes on ATF with a view to making air travel cheaper.

Replying to a debate on the Aircraft (exemption from taxes and duties on fuel and lubricants) Bill, 2002, the Union Civil Aviation Minister, Shahnawaz Hussain, agreed that air travel in India was costlier than travelling to Dubai or Bangkok due to high taxes, but declined to give an assurance that the State Governments would be reimbursed the losses incurred after the passage of the Bill. The Bill was first introduced in Parliament in December 2000. His Ministry had referred the matter of compensation to the Finance Ministry, which had to take a view in the matter.

Mr. Hussain informed the House that the Bill was to facilitate the implementation of agreements entered into by India with other countries as part of the Chicago Convention in 1944. Till 1994, the States were compensated by the Centre by way of subsidies. After December 1994, the States were reimbursed from the oil pool account. Till March 31, 2001, the States had been reimbursed about Rs. 700 crore from the oil pool account, which now had a huge deficit. Referring to his discussions with some State Governments, the Minister said that Andhra Pradesh had recently taken the lead in drastically slashing sales tax on ATF to four per cent, whereas the prevailing rates in all other States stood at between 20 and 39 per cent. The cost on ATF comprised about 30 per cent of total air travel cost for international and 22 per cent for domestic sectors. Mr. Hussain said that if aircraft belonging to Air India, Indian Airlines and other operators picked up fuel in a foreign land, they were exempted from paying sales tax and other taxes in that country.

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