The Centre is examining multiple measures to mitigate the impact of the ongoing West Asia conflict on airlines, including engaging with states to reduce taxes on jet fuel, as rising oil prices and airspace curbs push up operating costs.
Officials in the civil aviation ministry, led by Minister K Rammohan Naidu, have initiated discussions with chief ministers and state governments on lowering Value Added Tax (VAT) on Aviation Turbine Fuel (ATF), which constitutes around 40 per cent of airlines’ operational costs.
VAT on jet fuel varies widely across states, with rates as high as 25 per cent in Delhi and as low as 1 per cent in neighbouring Uttar Pradesh.
The ministry is assessing a range of options as part of broader efforts to shield carriers from the fallout of the conflict involving the US, Israel and Iran, which began on February 28.
Airlines have already curtailed services, particularly to West Asian destinations, while airspace restrictions are forcing longer routes for flights to Europe and North America, leading to higher fuel consumption and costs.
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A source indicated that the ministry is working on measures to ease the burden on carriers amid the volatile operating environment.
Regulatory coordination is also underway, with the Directorate General of Civil Aviation engaging with international counterparts to monitor developments.
DGCA chief Fiaz Ahmed Kidwai recently acknowledged the strain on airlines. “... we hope we see better days,” he said on March 26, noting that carriers are facing significant operational challenges due to rising costs.
He added that the regulator is working to promote ease of doing business for airlines while ensuring passenger rights are protected.
The developments come amid a broader policy response to rising fuel prices. The government has cut excise duty on petrol and diesel this week, while increasing the special additional excise duty on export of diesel and ATF to prioritise domestic availability.
The aviation sector now faces a combination of cost pressures and operational constraints, as the government explores fiscal and regulatory measures to stabilise the industry.
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