India’s high taxation structure on fuel and continued imposition of price bands are “bad ideas” that “retard” the recovery and growth of the aviation industry, said a senior executive at the International Air Transport Association (IATA).
Aviation fuel in India attracts the highest levels of taxes in the world. Airlines have been requesting the government to bring the fuel under the new tax regime of GST. The government hasn’t done that yet. It has also imposed upper and lower bands on air fares levied by carriers.
Indian carriers that were beginning to recover from the throes of Covid19 have now been hit by a spate price increases in jet fuel that have forced them to raise prices. The high fares have impacted demand.
“It doesn’t require a situation like Covid to make these changes,” said Philip Goh, regional vice president for Asia Pacific at IATA said the industry body’s annual general meeting in Doha.
Taxes is always an issue for the airlines whether it is in fuel or in any other possible way,” he said. He gave the example of Thailand which wants to levy tourism tax to increase its revenue,”
“These are all bad ideas that retard the recovery on avsition and tourism Any measures that increases costs and depress airlines’ ability to increase revenue are bad for the economics of aviation,” he said.
Earlier in the day, Vistara chief Vinod Kannan said that domestic air travel demand has been impacted because of high fares induced by higher fuel prices.
He said the impact will be seen more in the upcoming lean months of July to September.
Fuel prices touched record highs at several points of time this year. State run oil refiners in May increased fuel prices by 16% making them touch new records.
SpiceJet NSE -2.84 % chairman Ajay Singh recently said the airline would increase prices by 15%. IndiGo chief Rono Dutta also has said the airline will hike prices to on pass the impact of higher fuel price to customers.
Kannan also said the airline would like the government to remove upper and lower bands on air fares. He added that fares have increased on the international routes too.
