ATF 8 Times Costlier For Domestic Carriers : ASSOCHAM Report
Domestic aircraft operators pay over 8 times higher taxes on Aviation Turbine Fuel (ATF) as these are charged with various tax levies, totalling 66% against 8% on international airlines that fill-in ATF in India and thus erode their annual profitability by 10.5% to 15%, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
These findings are revealed in a Paper brought out by ASSOCHAM on `Implications of Higher Tax Incidences on ATF for Domestic Flyers' highlighting that fuel is the largest component of operating expenses for airlines, accounting for almost 35-40% of their total cost.
As a result of higher tax incidences on ATF for domestic carriers like sales tax, central excise, import duty and education cess which works out to be 66% as against 8% for overseas airlines, their adverse effect on profitability of full service carrier is estimated at 10.5% as per ASSOCHAM paper. However, on low cost carriers, the ATF taxes burden on their profitability is assessed around 15%".
According to ASSOCHAM, the scheduled operators in aviation industry have largely been protected from the impact of custom duty on import of aircrafts or partsofaircraftsintoIndia. Furtherscheduledaircrafts are also exempt from payment of excise duty on aircrafts manufactured in India, whereas the aircrafts are used to operate a scheduled route.
It has further estimated that the emerging middle class along with upper and upper middle population will grow to nearly 40% of the total population by 2007-08, whose size is likely to go over 55% in next 3 years and thus further enhance a huge demand for air travel services.
While until lately, the target category of households has been only the upper middle to high-income categories, the drop in fares and conversion of premium rail travellers to air travellers could result in widening the addressable market to cover even the middle income households.
The modernization and expansion of the major airports of Delhi, Bombay, Chennai, Kolkata, Hyderabad and Bangalore are expected to facilitate further growth in traffic.