Times of India | Anupam Manur
Indian aviation faces severe structural fragility, with Aviation Turbine Fuel (ATF) costs now comprising nearly 60% of airline operating expenses, leading to warnings of insurmountable losses and flight cancellations from the Federation of Indian Airlines (FIA). This crisis is exacerbated by government policies including a 100% monopoly of state-owned Oil Marketing Companies (OMCs) in ATF supply, an irrational import-parity pricing model for domestically produced ATF, an 11% ad valorem excise duty, and ATF's exclusion from GST, resulting in fragmented state VAT rates up to 29%. These factors cause Indian airlines to pay approximately 65% more for ATF than foreign counterparts. Additionally, Indian carriers engage in minimal financial hedging due to restrictive RBI regulations, increasing vulnerability to price spikes. The government's perception of air travel as a luxury good drives this extractive tax structure. Strategic policy reforms are urgently needed to liberalize OMCs, introduce competition, scrap import-parity pricing, implement flat and low ATF taxes, and integrate ATF into GST to foster a more accessible and competitive aviation sector in India.