Air India, IndiGo, SpiceJet approach Centre, seek duty cut on ATF

As the ongoing West Asia conflict continues to disrupt fuel supply and pricing across the world, the Federation of Indian Airlines (FIA), which represents major Indian airlines like Air India, IndiGo and SpiceJet, has written to the Centre urging revision of excise duty on aviation turbine fuel (ATF). It further stated the country’s airline industry is currently under extreme stress and on the verge of "stopping operations.

ATF accounts for around 40 per cent of a carrier's operational expenses. The FIA, in its letter to the Civil Aviation ministry, further stated that the government should take steps to extend the same fuel pricing mechanism uniformly across both domestic and international operations, as was done in the past with the establishment of the crack band.

Pricing disparities

With an unprecedented rise in jet fuel prices and exorbitant crack/differential between crude and ATF, the federation said the operation of airlines is being challenged in totality.

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"... Any ad hoc pricing (domestic vs international) and/or irrational increase in the price of ATF will result in unsurmountable losses for airlines and will lead to grounding of aircraft, resulting in cancellation of flights," the federation, which represents Air India, IndiGo and SpiceJet, said.

"In order to survive, sustain and continue operation, we request your urgent intervention for immediate and meaningful financial support to tide over the current situation," it said in a letter on April 26.

Tax and duty measures

Also, the airlines have sought temporary deferment of excise duty on ATF, which is at 11 per cent.

"With the abnormal increase in ATF prices from the pre-crisis period, adding rupee depreciation to the increased prices, the 11 per cent excise duty also increases manifold for the airlines and adds to the ATF price as a big impact on airlines," they said.

Last month, the government limited the hike in ATF price to Rs 15 per litre for domestic operations, but for international operations, the price rose by Rs 73 per litre.

Issue of international routes

The airlines said the situation has practically made international operations, along with domestic operations, completely unviable and resulted in significant losses for the aviation sector in April.

Seeking urgent intervention on the current ATF ad hoc pricing, FIA said the current situation is creating a severe imbalance in domestic and international operations and rendering airline networks unviable and unsustainable.

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"The airline industry in India is under extreme stress and is on the verge of closing down or of stopping its operations." The federation has pitched for a transparent pricing framework under the crack band mechanism (USD 12–22/BBL) that was implemented in October 2022, saying there was a fair and reasonable margin for Oil Marketing Companies (OMCs).

Tax burden varies across key hubs

According to FIA, the country's largest aviation hub Delhi has the second-highest value-added tax (VAT) of 25 per cent on jet fuel, while the highest rate is 29 per cent levied in Tamil Nadu.

"The other major aviation cities, viz. Mumbai, Bangalore, Hyderabad, and Kolkata range between 16 per cent and 20 per cent. These 6 cities cover more than 50 per cent of airlines' operations within India," the federation said.

Global volatility hits planning

The impact of the West Asia conflict on Indian aviation is being felt well beyond immediate cost spikes, with industry executives reportedly linking it to a broader cycle of volatility in global oil markets and route planning.

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As crude prices react to geopolitical uncertainty in the region, aviation turbine fuel (ATF) has become more expensive and less predictable, complicating fare planning and revenue management for carriers such as Air India, IndiGo and SpiceJet.

Analysts quoted in recent reports note that Indian airlines are particularly exposed because of high state taxes on ATF and limited hedging practices, leaving them more vulnerable to sudden swings in global fuel prices compared with some international peers.

Airspace curbs disrupt operations

There is also a structural operational impact tied to the conflict. Airspace closures and restrictions across parts of West Asia have forced airlines to reroute flights, especially on sectors connecting India with Europe and North America.

This has increased flight durations, crew costs and fuel consumption, while also tightening aircraft utilisation at a time when fleets are already stretched. Industry observers cited in coverage by The Hindu BusinessLine point out that such disruptions can cascade through airline networks, affecting schedules, connectivity and profitability over time, even if the conflict remains geographically distant from India.

(With agency inputs)