Tamil Nadu Chief Minister Vijay's government has received praise from the Centre after announcing a substantial reduction in value-added tax (VAT) on aviation turbine fuel (ATF), offering relief to airlines struggling with rising operating costs.
The state has reduced ATF VAT at Chennai airport from 29% to 16%, while fixing the rate at 1% for all other airports in Tamil Nadu.
Civil Aviation Minister Ram Mohan Naidu welcomed the decision, thanking Vijay and emphasising the importance of cooperation between the Centre and states in making air travel affordable.
Tamil Nadu ATF Tax Cut Offers Relief To Airlines
The decision comes as airlines face mounting financial pressure from higher crude oil prices and disruptions linked to the ongoing US-Iran conflict.
ATF, which previously accounted for approximately 30-40% of airline operating expenses, now reportedly represents 55-60%.
Indian carriers face additional challenges from a weakening rupee and restrictions on Pakistani airspace, which increase flying times and fuel consumption on certain international routes.
Aircraft leasing and maintenance expenses, largely denominated in dollars, have further increased pressure on airline finances.
Ahead of the festive season, the Federation of Indian Airlines warned that carriers could reduce services on financially unviable routes because of rising jet fuel costs.
Since ATF remains outside the Goods and Services Tax (GST) framework, individual states determine their own VAT rates.
Lower taxation could reduce airline expenses and potentially moderate ticket prices, particularly on routes benefiting from substantial tax savings.
Government Expects Better Regional Air Connectivity
Announcing the decision on Friday, Tamil Nadu Industries Minister Virudhai Magal Keerthana described the tax reduction as an important measure to improve aviation accessibility and strengthen regional airports.
She said lower operating expenses could encourage airlines to introduce additional routes, increase flight frequencies and expand services beyond Chennai.
The government expects improved air connectivity to support regional economic activity and attract further aviation investment.
Naidu also stressed that passenger interests should remain central to cooperation between the Union and state governments.
However, any reduction in airfares will depend on airlines passing their fuel tax savings on to passengers.
