The government will certainly reassess the price cap in place for domestic airlines once the environment is healthier in terms of jet fuel prices, according to Civil Aviation Minister Jyotiraditya Scindia.
After the coronavirus pandemic shook the country’s civil aviation space, the sector is now in recovery mode, especially in terms of air traveler numbers and Akasa Air has also started its services, becoming the first national carrier to launch operations over the past eight years.
Amid the lingering pandemic blues, the ministry has implemented the price cap system for local airlines. Currently, the rate cap is applicable on a continuous basis for a 15-day cycle.
In an interview with PTI, Scindia said that currently airline fares are not close enough to the low end of the price cap and are far from the high end of the price cap.
“I’ve seen stabilization happening and at the appropriate time we will certainly look at that. I’m also watching ATF prices go down and as it becomes a healthier environment we will certainly reevaluate that,” the minister said. .
In May, Scindia said the price cap acts as a protector for air travelers as well as airlines.
Aviation jet fuel (ATF) or jet fuel prices have been on an upward trajectory in recent months, particularly following the ongoing conflict between Russia and Ukraine. Recently, prices in the country have been reduced but remain well above the level seen during the pre-pandemic period.
While acknowledging that the airlines face many structural problems, Scindia said the price of ATF had increased due to the Russian-Ukrainian war, from Rs 53,000 per kilo liter in 2019-2020 to nearly of Rs 1,41,000 per kilo liter until last week.
The price has been reduced by almost 16%, or about Rs 21,000 per kilo litre, but is still double what it was before, he noted.
“If you are an airline, 39% of your cost structure used to be ATF at Rs 53,000 per kilo liter. Now the ATF price has risen to Rs 1.20,000 per kilo liter. structurally, this is the challenge they are facing,” said the Minister.
Meanwhile, Scindia has urged various states and union territories (UTs) to reduce the value added tax (VAT) they charge on jet fuel.
VAT on jet fuel in some states and UTs was in the 20-30% range and many have reduced rates in recent months.
According to Scindia, when he took office as civil aviation minister in July last year, the VAT on the ATF was between 20 and 30 percent in 26 states and UT.
“Today, by persuasion, by clasping hands, by imploring them, by pleading with them, by making them understand the reason for greater gains for them, greater flight connectivity, greater economic multipliers and I’m very happy to report that out of 26, 16 states (and UTs) have gone from a 20-30% VAT to a 1-4% bracket,” he said.
Additionally, Scindia said it is working with the remaining states and UTs to also reduce VAT on the ATF to ensure the civil aviation sector grows and everyone wins,” state governments as well as the industry”.
Regarding air traffic, the Minister indicated that the number of passengers will only increase.
“In high season, we have surpassed the pre-COVID high of 4.07 lakh (air travellers)… High season is (usually) April to July and low season mid-July to September, then the festival season takes off from October to January, then from January 15, it runs out of steam until mid-March.
“Today we are in the range of 3-3.4 lakh which for a low season is a decent figure. In terms of passenger numbers, it will only increase in the future,” a- he declared.
On August 8, there were 315,289 passengers on 2,509 flights. “National aviation operations are skyrocketing with all Covid protocols in place,” the Civil Aviation Ministry said in a tweet on Tuesday.
(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)