The civil aviation ministry has again asked the finance ministry to amend the Finance Bill 2003 and exempt Indian Airlines and Air-India from paying duty on aviation turbine fuel for their international operations.

Both national carriers pay an excise duty of 16 per cent, plus an additional sales tax on ATF.

According to WTO (World Trade Organisatuion) norms, international carries do not have to pay duty on ATF. The civil aviation ministry has said the present arrangement works to the disadvantage of IA and A-I.

It wants the national carriers to be exempted from paying duty to ensure a level playing field and to make them internationally competitive.

Ministry officials said the duty exemption was a pre-Budget commitment on the part of the finance ministry and they have written to it to incorporate the exemption in the revised Finance Bill to be passed by Parliament in May.

IA officials have welcomed the latest move. Senior IA executives said they have been clamouring for an exemption for some time now.

They want the  disparity removed as it puts them at a cost disadvantage relative to international carriers and affects their economic viability.

They added that such a move will enable them to pass on the benefits to its customers.

Besides the excise duty on ATF, the two national carriers have to pay sales tax ranging from 4-39 per cent to various state governments.

For both IA and A-I, the bulk of international business comes from operating flights to the Gulf from the southern states.

However, these states levy very high taxes on them. The highest sales tax on ATF of 39 per cent is levied in Kerala. Karnataka  levies 28 per cent sales tax and Tamil Nadu 25 per cent. Gujarat, which has the highest outbound traffic, levies a sales tax of 36 per cent. Only Andhra Pradesh has rationalised its sales tax to 4 per cent.

ATF accounts for 30 per cent of the operating costs of the national carriers because of its high base price and the sales tax rates. The recent hike of 12 per cent in ATF prices across the globe has also hit them hard.

For IA, the fuel bill for 2002-03 is likely to touch Rs 1,315 crore (Rs 13.15 billion). A-I ran up a fuel bill of Rs 905 crore (Rs 9.05 billion) in 2001-02. This year it is likely to cross Rs 1,000 crore (Rs 10 billion).