IndiGo’s Chief Executive Officer Ronojoy Dutta calls the Indian airline industry ‘chronically ill’ and requests the central Government to implement some life-saving reliefs quickly. The COVID-19 pandemic crippled India’s domestic airlines. They witness a drop in passenger numbers and suffer from the maladies of high price for Aviation Turbine Fuel (ATF), which increase the cost of operations for airlines. Dutta requests to reduce the jet fuel tax from 11% to 5% in the Union Budget 2022-23.
According to IndiGo’s CEO, aviation pays 21% of its revenues to the Government as indirect taxes with little input on credit. “It is an unreasonable proposition to expect that the aviation industry should earn 21% margin just to pay the government,” he said.
Dutta also suggests bringing ATF under GST, a matter GST Council has to decide. In addition, he calls to eliminate the customs duty on repair parts. “A rationalisation of taxes will result in explosive growth for aviation, which will have multiplier effects throughout the economy, stimulating commerce and employment and integrating the different regions of our diverse country closer together,” Dutta said.
Indian airlines to report huge loss, says CRISIL
CRISIL ratings recently estimated that India’s domestic airlines could report a collective loss of nearly Rs 20,000 crore. Domestic airlines have always been a victim of high fuel prices. ATF constitute around 25%-40% of airlines’ operating cost. Some state governments levy as high as 25%-30% Value Added Tax (VAT) on ATF. ATF has shown a sharp increase of 67.3% on a year-on-year basis till December 2021, primarily due to the rise in crude oil prices.
Financial aid from Government, primarily reduction in taxes, can help airlines revive their operations and boost passenger traffic. According to ICRA, the credit rating agency, the rising aviation turbine fuel charges clubbed with relatively low capacity utilisation of the aircraft fleet will continue to hinder the financial performance of Indian carriers in FY2022. The aviation industry started showing signs of recovery in November 2021. However, the new Omicron variant forced the Government to curtail free movements, which derailed the recovery of Indian airlines. The Government extended the plans to open the schedules of international airlines until February 2021.