The civil aviation ministry is looking at ways to reduce the impact of the West Asia conflict on Indian airlines, with a possible cut in state taxes on jet fuel on the table.
The conflict involving the US, Israel and Iran since February 28 has pushed up oil prices and led to airspace restrictions. Airlines are now flying longer routes, especially on Europe and North America sectors, which is increasing fuel burn and overall costs.
A highly placed source said the ministry was considering multiple options as part of larger efforts to reduce the impact of the West Asia conflict on the carriers.
Civil aviation minister K. Rammohan Naidu has started discussions with chief ministers and state governments on reducing VAT on Aviation Turbine Fuel (ATF), the source said.
Fuel accounts for around 40 per cent of an airline’s operating cost, making it the biggest expense. VAT on ATF differs widely across states. In Delhi, it is 25 per cent, while in neighbouring Uttar Pradesh, it is just 1 per cent.
Airlines have also cut some services, particularly to West Asia, due to the situation. At the same time, airspace curbs are forcing rerouting of flights, adding to operational pressure.
With oil prices rising, the government has cut excise duty on petrol and diesel this week. It has also increased the special additional excise duty on exports of diesel and ATF to ensure domestic supply.
According to the source, aviation regulator DGCA is in touch with its counterparts in other countries as the situation continues to change.
On March 26, DGCA chief Fiaz Ahmed Kidwai said airlines were facing big challenges and their operating costs were going up.
"We hope we see better days," he said and emphasised that the DGCA was trying to promote ease of doing business for airlines to help them grow and flourish, as well as taking steps for passenger rights.