The government on Wednesday introduced custom duty on air turbine fuel (ATF) in a bid to decrease its account deficit. The move is expected to push up airfares by 10 percent.
The government has raised the duty from 5 percent from a previous zero. The rate change will apply from today.
Except for Indigo that imports some of its ATF, rest of the airlines buy their supply form refiners such as Bharat Petroleum. These flight companies expect refiners to pass the duty hike to them.
According to airline sources, the 5 percent hike will result in about 7.5 to 8% increase in actual amounts, Forcing them to up flight charges by approx 10 percent.
Fuel makes up to as much as 40% of an airline’s cost.