India's civil aviation ministry calls on finance ministry to help airlines

Hyderabad
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India's ministry of civil aviation is appealing to the country's ministry of finance to roll back a new service tax on domestic passengers and a hike in the excise duty on aviation jet fuel.

The 2010 Indian budget proposed a 10% service tax on domestic passengers, who constitute the majority of traffic for the country's airlines.

It has also proposed increasing the duty on jet fuel to 12% from 8%, on top of a tax that is levied by the individual states and varies from one to another. Civil aviation minister Praful Patel says he will ask for these to be suspended or cancelled.

"I will put to the finance ministry that the aviation industry is just coming out of an extremely troubled patch," says Patel. "We hope that the finance ministry will consider our request favourably."

India's airlines say that this will put pressure on their margins just when the domestic market appears to show signs of recovery, and they are looking at how they can cushion the impact of the increases.

Kingfisher Airlines chairman Vijay Mallya says his carrier is studying the impact of the move and will make a decision shortly if the taxes are not rescinded.

"Clearly airlines cannot swallow the additional burden and will have to pass them on. We will assess the impact and take a decision on fares next week," he adds.