Relief for flyers! Airlines unlikely to hike airfares; here is why

Levying of 5 per cent customs duty on jet fuel is unlikely to push airfares higher as bulk of the fuel is produced locally, a senior Finance Ministry official said Thursday.

The government has decided to hike import duties on 19 non-essential items, including Aviation Turbine Fuel (ATF), to curb widening current account deficit amid rising oil prices and falling rupee. Image Source: Reuters

Levying of 5 per cent customs duty on jet fuel is unlikely to push airfares higher as bulk of the fuel is produced locally, a senior Finance Ministry official said Thursday. The government has decided to hike import duties on 19 non-essential items, including Aviation Turbine Fuel (ATF), to curb widening current account deficit amid rising oil prices and falling rupee.

The official said imposition of customs duty on jet fuel should not lead to fare hike as bulk of it is produced by domestic refineries. "When we did the exercise of looking at how many items are essential and how many are non-essential, we also looked at whether their capacity in India is available for that item.

"This is the result of the scrutiny of all the items that we have done. We have to look at every small measure to conserve the balance of payments," he said. With regard to ATF, the official said India is not short of jet fuel and the total usage of the fuel was worth Rs 30,000 crore last year.

The import last year was worth Rs 1,100 crore and a 5 per cent duty on that would be a miniscule Rs 55 crore. So, the imposition of duty may not impact airline fares, he noted. Other items on which import duties have been hiked include air conditioners, radial car tyres, cut and polished diamonds, semi-processed diamonds, lab grown diamonds, coloured gem stones, articles of jewellery and silver wares.

Asked about these measures not having a positive impact on the stock market, the official said it is driven by sentiment rather than logic. "There is nothing wrong in the fundamentals of economy. India is on the path of sustainable growth and we are bound to grow," the official said.

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Stocks spiralled lower for the second straight session Thursday after the US Fed hiked interest rates and struck a hawkish stance amid rising crude oil prices. The BSE Sensex tumbled 218.10 points to 36,324.17, while the NSE Nifty dropped 76.25 points to finish below the 11,000-mark.

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