Bhubaneswar, July 11: The prospective civil aviation plan has run into rough weather with the finance department turning down chief minister Naveen Patnaik’s proposal to attract international flights by reducing value-added tax on aviation turbine fuel (ATF).

At the inaugural function of the new domestic terminal at Biju Patnaik Airport on March 5, Naveen said his government would consider lowering value-added tax (VAT) on the ATF from 20 per cent to 4 per cent to boost the aviation sector in Odisha.

The state aviation plan would have gained had long-distance flights made the city a favoured destination to refuel. As a spin-off, the tourism sector would also have benefited as several Buddhist shrines are located in the state. Biju Patnaik Airport is hoping to get the international tag by August next with expected flight operations to southeast Asia and the Middle East.

Union civil aviation minister Ajit Singh, who was present at the March function, had also urged the state government to reduce VAT to attract international flights.

But, the finance department has played spoilsports on the advice of a reputed financial consultant. The department said barring Chhattisgarh and Jharkhand, where the tax on ATF had been reduced to 5 per cent and 4 per cent, respectively, all other states had higher tax rates as “in general petroleum products have been considered as a polluting goods”.

After Chhattisgarh and Jharkhand, the lowest tax rate on the ATF is 16 per cent in Andhra Pradesh.

The consultants have asked the state government to tax the ATF heavily given their adverse impact on the environment. It also argued that sharp drop in ATF tax might affect road, rail and water transport sectors.

Joint secretary, general administration department and in charge of civil aviation, Premananda Khuntia said: “We will urge the finance department to reconsider its decision as the chief minister himself had promised reduction at a public function .’’

Aviation industry sources said VAT reduction on turbine fuel would attract international carriers that require night parking. This will augment revenue. Night parking facility for wide-bodied aircraft might also prompt international carriers to extend their link service to Bhubaneswar.

A senior state government official, however, argued that low ATF tax would only benefit Airports Authority of India and the airliners.