Tony Tyler, CEO of the International Air Transport Association (IATA), has a remedy for India’s high fuel taxes. The CEO has said that India can remove excise and customs duty, and apply a standard State tax.

Stating that the high cost of jet fuel has been hijacking the competitiveness of the Indian air transport industry for over a decade, Tyler called for the removal of certain taxes.

Standard rate

“While there have been reductions by some State governments, more can be done. This includes removing the excise tax and customs duties, and applying a standard 4 per cent State tax,” he said, in an email interview with Business Line .

Tax burden

During the Singapore Airshow Aviation Leadership Summit on February 10, Tyler was asked to comment on India’s high jet fuel taxes.

“Domestic fuel taxes can be as high as 30 per cent, on top of an 8.2 per cent excise duty. As a result, fuel for Indian airlines is about 45 per cent of total operating costs, compared to the global average of 30 per cent.”

This is destroying the competitiveness of Indian airlines, he said.

The chief of the world’s biggest grouping of airlines, however, lambasted India’s poor infrastructure, in his keynote address at the Singapore Summit. “Taxes are not the only issue. The availability of efficient infrastructure is equally important ...India remains a problem,” he had said.

Terming the new terminal at Mumbai “a stop-gap measure”, Tyler added it would provide little relief.

“The long-term solution is runway capacity,” he said, adding that “the Navi Mumbai airport project is (also) nowhere near completion.”

Deterrent factors

The IATA chief added that poor infrastructure and high taxes were working as a deterrent to the development of the aviation sector, which, he said, had a huge role to play in fostering economic growth. Incidentally, airlines globally are set to post a record $19.7 billion in combined net income in 2014, after the global slump prompted a wave of consolidation and streamlining in the sector.

Tyler opined that discouraging travel through draconian taxes hurt the economy, while connectivity stimulates business that provides tax revenues.

He noted that an average person in the US takes about two trips by air a year. In the case of India, the average is one trip every 10 years.

Tyler has urged the Government to facilitate the success of the sector given that “is a powerful tool to drive economic development”.

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