Ashok Gajapathi Raju downplays 6 per cent hike in excise duty on ATF

Civil aviation minister Ashok Gajapathi Raju and top officials of his ministry on Wednesday sought to downplay the impact of the proposed six per cent hike in excise duty on ATF in the Budget by pointing out that it should be seen in the backdrop of a 35 per cent fall in ATF prices over the past one year.

The ministry said that the government had decided to “mop up” additional excise duty, with Mr Raju saying, “I can’t say it is a setback.” The ministry also pointed out that the excise duty hike would not be applicable on flights operating under the regional connectivity scheme. The excise duty hike on ATF will lead to higher air-fares as ATF accounts for about 45 per cent operating cost of airlines. In an important announcement, Mr Raju also said that a second airport for the Delh-NCR region would be required by 2022-23 as the IGI airport with its current capacity is expected to get saturated by air-traffic by then.

Referring to the incentives given to the MRO sector in the Budget, Mr Raju also said the budget had paved the way for developing India as a Maintenance, Repair and Overhauling (MRO) hub of Asia. He said one lakh jobs would be generated in the MRO sector in the next three years as a result including 20,000 high-end jobs.

The minister also said ticketing prices had come down by 18 per cent from October-December, 2014, to October-December, 2015.

The Civil Aviation Ministry also said its draft aviation policy would be placed before the Cabinet by the end of the month. Ministry officials also said that as per indications, 70 million domestic tickets in the country currently will go up to 300 million domestic tickets by 2022. On the contentious 5/20 rule in the aviation sector, ministry officials indicated that a replacement would take into account a level-playing field for all airlines.

Meanwhile, the FIA—-a body comprising of the four older private scheduled carriers—-today demanded a roll back of the 12 per cent hike in jet fuel prices by oil companies and sought appointment of an independent price regulator to deal with the issue of “irrational” pricing. In a letter to Civil Aviation Minister Ashok Gajapathi Raju today, copies of which were marked to his deputy Mahesh Sharma and the Finance Minister, Federation of Indian Airlines (FIA) also threatened to move fair trade watchdog CCI if the “non-transparent” price increase continues.

“In March 2016, FIA members have been informed of a 12 per cent increase in prices without any explanation. No response has been received from oil companies regarding this price revision and oil pricing continues to be non-transparent to the detriment of consumers and citizens,” the FIA said in the letter. The FIA is a body of four established domestic private airlines——Jet Airways, IndiGo, SpiceJet and GoAir. ATF prices were hiked by 12 per cent by the oil marketing companies on global cues.

“The FIA also keeps open its option to pay for fuel in line with the earlier charges,” the letter was quoted by news agencies, as stating. On behalf of the FIA, the airlines requested that this “irrational” price revision be reversed, the letter said adding, “additionally, we submit that an independent price regulator be appointed with immediate effect.”

“In case this is not done and the non-transparent price increase continues we will be forced to refer this matter to the Competition Commission of India,” the FIA letter said.