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No VAT relief yet, fliers worried
September, 12th 2013

With the state government still dilly-dallying on value-added tax (VAT) reduction in aviation turbine fuel (ATF), domestic fliers are a bit jittery about flight operations from the state capital.

Two weeks ago Air India decided to stop its Bhubaneswar-Bangalore flight from early winter citing loss. Similarly, the Vijayawada-based regional airliner Air Costa, which had evinced interest to operate from here, is in two minds. It is yet to apply to the director-general of civil aviation (DGCA) to start the operation, sources said.

Chief minister Naveen Patnaik in March, during the inauguration of new domestic terminal, promised to reduce VAT on ATF from 20% to 4%, purportedly for attracting international fliers.

"Let alone international fliers, with 20% VAT on aviation fuel, the domestic fliers will also be reluctant to refuel their planes here," said an Air India official, pointing out that they decided to stop operation of Bangalore-bound flight because of added burden of heavy tax on fuel.

Sources said although the CM was keen on reducing VAT on ATF, the finance department declined the proposal.

"Except Chhattisgarh and Jharkhand, which have reduced VAT on ATF to 5%, no other states have implemented it. Moreover, it is a loss to be borne by the state government but it is profit for Airports Authority of India (AAI) and the airlines," reasoned a state government official.

He, however, said they would urge the finance department to reconsider VAT reduction at least to 10%, if not 4%.

Earlier, three international fliers - Silk Air (Singapore), Fly Dubai (Dubai) and Indigo (Bangkok) - evinced interest to start international flight operations from here. But, with the aviation ministry yet to give the international tag to Biju Patnaik Airport and state government indecisive on VAT reduction, the fliers are in no mood to start flight operation from here.

The Biju Patnaik airport authorities expect to get at least 180 passengers a day for Bangkok and 150 passengers each to Dubai and Singapore from Bhubaneswar.

 
 
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