After years of complaints about cripplingly high taxes on the civil aviation sector, India's government has finally relented during an election year and has slashed tariffs.

Indian carriers and the tourism industry have welcomed the cuts, which were announced days after the start of the New Year and took effect on 9 January. The carriers say the reduced taxes should lead to a pick up in domestic traffic this year - despite the fact that many civil aviation-related taxes remain as some states impose their own tariffs on fuel of up to 39%.

Under the new regime, the federal government's excise duty on aviation turbine fuel has been reduced from 16% to 8%. Its inland air travel tax of 15% has also been abolished, as has a so-called foreign travel tax of Rs500 ($11) per passenger.

The changes precede national elections expected later in the year. Airlines have long complained about high taxes, saying they are preventing many people from travelling by air.

Despite a population base of more than 1 billion people and a fast-growing middle class that is now estimated to number as many as 150 million, only 13 million passengers were carried on domestic flights in 2002, around 3 million of which were foreigners. By comparison, India's state-run railways carry around 13 million passengers each day.

Some studies have forecast that with changes to tax structures, domestic airlines could be carrying 40-45 million passengers annually by the end of the decade. The Confederation of Indian Industry said in a study last year that the average domestic price of fuel was 99% higher than in foreign countries and domestic fares were 23-30% higher than international fares for a comparable distance


Source: Airline Business