Energy Budget 2017: Flight prices expected to go down after likely excise duty cut on aviation turbine fuel

While the government had raised the excise duty at the time of low global oil prices, the cut back ensures that fares do not show sudden increases.

Written by: Srividhya Iyer

Updated: January 26, 2017, 9:33 AM IST

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https://www.india.com/news/india/energy-budget-2017-flight-prices-expected-to-go-down-after-likely-excise-duty-cut-on-aviation-turbine-fuel-1782233/ Copy

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New Delhi, January 25: The Ministry of civil aviation has recommended that the excise duty applied on Aviation Turbine Fuel (ATF) or Jet fuel be reduced to 8 percent. the move, that is largely expected to be included as part of the budget would mean a 43 percent decrease in the existing excise duty placed on jet fuel.

The move comes as the government is trying to establish a wider footprint of the aviation industry across India. Experts predict that the reduction on the excise duty will not impact the government coffers significantly as lost sums are expected to be compensated by a greater expansion of the industry.

It is also thought that the decision has been taken in view of rising fuel prices. While the government had raised the excise duty at the time of low global oil prices, the cut back ensures that fares do not show sudden increases. In fact many predict that stable oil prices could result in a possible decline in current flight ticket costs. (ALSO READ: Budget 2017: Infrastructure industry expects relief in direct and indirect taxation)

In a drastic turn from tradition practices, Civil Aviation Minister Jayant Sinha had called for opinions from various members of the industry as well as professional consultants. There was widespread concensus on deducting the excise duty on jet fuel. ther demands also included placing of jet fuel under the gambit of the GST while segregating it from other petroleum products.

While there is no clarity on whether aviation turbine fuel will be included under the GST, the government is largely expected to impliment the cut back on the excise duty placed on it. This is specially important considerin the fact that the airline industry, including the state run Air India, are seeing profits after a long dry spell. This can largely be attributed  to increased passenger numbers and low fuel costs. The proposed reduction will assist the industry in maintaining its current upward trajectory.