West Asia Conflict Impacts Indian Airlines: Ministry Explores Options

Government Explores Tax Relief Measures as West Asia Conflict Drives Up Airline Costs​

New Delhi, March 29: The Ministry of Civil Aviation is evaluating multiple measures to cushion Indian airlines from the financial strain caused by the ongoing West Asia conflict, with a key focus on reducing taxes on aviation turbine fuel.

Talks Underway to Reduce Jet Fuel Taxes​

According to sources, Civil Aviation Minister K Rammohan Naidu has initiated discussions with chief ministers and state governments to explore the possibility of lowering Value Added Tax on jet fuel. Since VAT on Aviation Turbine Fuel varies significantly across states, the move is being considered as a way to bring immediate relief to airlines facing rising expenses.

For context, VAT on jet fuel stands at 25 per cent in Delhi, while neighboring Uttar Pradesh levies just 1 per cent, highlighting the disparity in taxation.

Rising Fuel Costs and Airspace Restrictions Impact Airlines​

The conflict in West Asia, involving the United States, Israel, and Iran since February 28, has led to a sharp increase in operational challenges for airlines. Rising global oil prices have significantly pushed up fuel costs, which already account for nearly 40 per cent of an airline’s total operational expenditure.

In addition, airspace restrictions linked to the conflict have forced airlines to reroute flights, especially those operating to Europe and North America. These longer routes are resulting in higher fuel consumption and increased operational costs.

Airlines Curtail Services Amid Ongoing Uncertainty​

Airlines have also scaled back scheduled services, particularly to affected regions in West Asia, as the situation continues to evolve. The uncertainty has added further pressure on airline operations and planning.

Government Steps to Ensure Fuel Availability​

Amid rising crude prices, the government has taken steps to manage fuel supply and pricing. This week, excise duty on petrol and diesel has been reduced. At the same time, additional excise duty on the export of diesel and aviation turbine fuel has been increased to prioritize domestic availability.

DGCA Engages Globally as Situation Develops​

The Directorate General of Civil Aviation is actively monitoring the situation and remains in contact with aviation regulators in other countries. DGCA chief Fiaz Ahmed Kidwai, speaking on March 26, acknowledged that airlines are facing significant operational challenges due to the evolving geopolitical environment.

He added that efforts are underway to improve ease of doing business for airlines while also safeguarding passenger rights, expressing hope for a more stable operating environment in the near future.

Outlook​

With fuel costs rising and operational complexities increasing, the government’s ongoing discussions with states on tax rationalization could play a crucial role in stabilizing the aviation sector in the coming weeks.