India's union civil aviation minister Ajit Singh has called on his state counterparts to reduce taxes on aviation fuel and take other measures to assist the growth of the country's aviation industry.

Singh, who was speaking at a conference of state aviation ministers, noted that the high level of state-imposed value added taxes (VAT) on aviation turbine fuel (ATF) has resulted in major losses for Indian carriers in recent years. He also praised states, such as Chhattisgarh, that have recently taken measures to reduce their taxes.

"Chhattisgarh had reduced VAT on ATF to 4% in 2010 and it has since seen [a] sixfold increase of ATF uplift from Raipur and an increase in [the] number of flights from Raipur from 8 to 18 per day," he says. "With more people travelling to the state, there has been considerable spin-off effects to the economy."

Last year, the government opened the way for Indian carriers to import ATF to avoid the high level of state taxes. Indian media reports say that SpiceJet has recently started a pilot programme to import the fuel, albeit only on a small scale.

Singh also called for the states to be more proactive in developing new airports around the country, particularly in regional areas.

"We need to develop smaller low-cost no-frill airports in potentially economically growing cities identified in various parts of the country, with the help of the state governments," he says.

The government says it is in the process of identifying 50 potential low-cost airports for development in collaboration with state governments, and that the Airports Authority of India is carrying out feasibility studies on the proposed projects.

Singh adds that developing more services to tier II and tier III cities would only be possible if the states played their part to reduce operating costs for airlines, and, in some cases, underwrite seat sales.

The civil aviation ministry says that it is "already working to bring out an integrated policy regime in this regard, which includes encouraging airlines to acquire smaller planes and [the] reduction of various airport charges".

The regional aviation market in India has been tipped as the next major growth opportunity for Indian carriers. Most carriers, however, have built their fleet plans around larger aircraft, such as the Boeing 737 and Airbus A320.

Nevertheless, Air India's Alliance Air subsidiary recently started three new regional services from Mumbai. Similarly, new start-up carrier Air Costa is planning to launch regional services later this year with a fleet of two Embraer 170s and one E-190.

Source: Flight International