Amid a sharp rise in global fuel prices triggered by the ongoing West Asia conflict, Civil Aviation Minister Ram Mohan Naidu has urged state governments to reduce Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) to ease pressure on airlines and passengers. His appeal comes at a time when ATF prices are set for another upward revision from April 1, which is expected to push airfares higher.
Sources indicate that the minister has directly reached out to multiple Chief Ministers, highlighting the urgent need to lower the tax burden on jet fuel. ATF is one of the largest cost components for airlines, and high state-level taxes significantly add to operational expenses. In states like Delhi, VAT on ATF goes as high as 25 per cent, while Maharashtra levies around 18 per cent. Tamil Nadu currently imposes one of the highest rates at 29 per cent.
The Ministry of Civil Aviation has also been holding separate consultations with state officials in an effort to build consensus on reducing VAT rates. Officials remain optimistic that a solution can be reached, given the extraordinary circumstances created by global fuel price volatility.
The urgency of the situation is underscored by the steep rise in international ATF prices. Since the escalation of tensions in West Asia on February 28, global jet fuel prices have nearly doubled. Data shows that the average price of ATF increased from about $99 per barrel in late February to over $195 per barrel by the end of March. This sharp surge has significantly strained airline finances.
Airlines have been consistently urging the government to intervene by persuading states to cut VAT, arguing that lower taxes would directly help stabilise ticket prices and sustain operations during this period of uncertainty. With India being a price-sensitive aviation market, any increase in fares can impact passenger demand, especially in the domestic segment.
The issue is particularly significant for major aviation hubs such as Delhi’s Indira Gandhi International Airport and Mumbai’s Chhatrapati Shivaji Maharaj International Airport, which handle a substantial share of the country’s air traffic. Higher fuel costs at these locations have a cascading effect across the entire aviation network.
The current situation highlights the complex interplay between global energy markets and domestic taxation policies. While the Centre can appeal and coordinate, VAT on ATF remains within the jurisdiction of state governments, making cooperation essential for any meaningful relief.
As fuel prices continue to remain elevated, the outcome of these discussions will play a key role in determining whether airlines can absorb some of the cost pressures or pass them on to passengers in the form of higher fares.
