Airlines can now import ATF directly

New Delhi: Ministry of commerce has now allowed import of Aviation Turbine Fuel (ATF) bearing ITC (HS) Code 2710 19 20 directly, instead of depending upon State Trading Enterprises (STEs) of Government of India. On 7th Feb, a Group of Ministers(GOM) on Civil Aviation had accepted the proposal for Ministry of Commerce permitting direct import of ATF by or on behalf of Indian Carriers as actual users and on actual use basis.

The ATF prices in India are 30 to 40 per cent more than the prices in international market due to high base price and higher taxes. The sales tax on ATF in different States in India is on much higher side, and varies between four to 30 per cent in different States.The revenue from sales tax on ATF contributes only 0.5 per cent to 2per cent of the total sales tax collection of the States while in terms of operational cost of the airlines its portion is almost 40%, which makes the operational cost of the airlines very high.

Since the states are not interested to bring down the levy, the sourcing of ATF through direct imports has the potential to lower overall procurement cost of ATF for the airlines as sales tax varying from 4 to 30 percent in different States will be required to be paid only on unavoidable local purchase. Also this would bring down the cost of working capital to the air lines as suppliers credit on lower interest rates will be feasible.

As per the proposal, the Indian carriers will have to now make their own tie-ups with the suppliers having infrastructure to import ATF directly for their use.