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Patel briefs Manmohan on high rates of taxes
June, 12th 2008

Concerned over the crisis in the aviation sector because of the skyrocketing prices of jet fuel, Civil Aviation Minister Praful Patel led a delegation of chiefs of several airlines on Wednesday to meet Prime Minister Manmohan Singh and apprise him of the hardships faced by the carriers.

The Prime Minister was given a presentation by Mr. Patel on the high rates of taxes, particularly sales tax imposed by States on Aviation Turbine Fuel (ATF).

Mr. Patel will make another presentation before the Empowered Committee of the Finance Ministry that deals with the sales tax and later meet Union Finance Minister P. Chidambaram.

Any decision on capping the sales tax rate at four per cent on ATF would have to be taken by State Finance Ministers. The airlines have hit a turbulent patch owing to the high cost of jet fuel which eat up about 40 to 50 per cent of the total cost of operations.

Every mode of transport has some kind of in-built component of subsidy barring air transport. The civil aviation sector is passing through a crisis because of very high jet fuel prices and a number of airlines are constrained to curtail their routes. Aviation is also a heavily taxed sector in our country, Mr. Patel later told reporters.

He was accompanied by Jet Airways chief Naresh Goyal, Kingfisher chief Vijay Mallya and chief executives of SpiceJet and GoAir as well.

Low-cost carrier SpiceJet estimated that it could lose up to Rs. 100 crore in the current fiscal, up from Rs. 70 crore in 2007-08, owing to the high jet fuel prices.

SpiceJet CEO Sidhant Sharma said the carrier has also pushed the break even point by one year to March 2010 from March 2009 earlier. The whole industry is facing huge loss due to the high ATF price and we expect our losses to be around Rs. 80-100 crore in this financial year, Mr. Sharma said after a meeting of CEOs with Mr. Patel.

The Center for Asia-Pacific Aviation (CAPA) had earlier projected a collective loss of $2 billion for airlines in India.

The SpiceJet chief said the airline would reduce its daily flights to about 100 a day from 117 at present to curtail the losses. We will cut flights in those sectors which have not been giving us any good return like Chennai-Bangalore, Hyderabad-Chennai and Jaipur-Ahmedabad, he said.

Mr. Mallya whose Kingfisher acquired substantial stake in the low-cost Air Deccan carrier said that it would no longer be possible to sustain no-frills operations by budget airlines.

 
 
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