Jewar Airport May Outshine Delhi’s IGI: Aviation Ministry Urges VAT Cut on ATF
A Call to Lower VAT on ATF
Civil Aviation Minister Rammohan Naidu Kinjarapu has urged Delhi’s new Chief Minister Rekha Gupta to lower the Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) from 25% to between 1-4%. This move aims to prevent possible flight diversions to the upcoming Greater Noida airport, which will offer more competitive fuel pricing.
Fuel Costs: A Major Concern for Airlines
- Fuel expenses make up about 40-45% of airlines’ operational costs.
Jewar Airport: Delhi’s Second Aviation Hub
The new airport at Jewar, Uttar Pradesh, situated near Greater Noida and southeast of Delhi, will serve as the capital’s second aviation hub. Its location could attract passengers from Delhi’s eastern suburbs and neighboring townships. Commercial operations are set to begin this year. The 1% VAT on ATF makes it an attractive refueling destination for aircraft, raising concerns for the GMR-managed Delhi airport.
Fear of Business Loss
In his letter dated March 19, the minister pointed out that Uttar Pradesh’s lower 1% VAT could encourage airlines to shift from Indira Gandhi International Airport to the Jewar airport facility. “This will impact Delhi airport due to the prohibitive cost difference of ATF,” Kinjarapu noted.
- Delhi’s Indira Gandhi International Airport leads India in passenger traffic, serving 73.6 million passengers in FY24, with international travelers accounting for 19 million – showing a 24% growth from the previous year.
Reducing VAT is considered crucial for maintaining IGIA’s competitive edge and supporting its contribution to tourism, trade, and employment sectors.
Varying VAT Rates Across India
States across India apply varying VAT rates on ATF, ranging from 0 to 29%.
- “The high VAT in Delhi significantly impacts airline operations and cost structures, making fuel one of the biggest expenses for carriers,” said an industry executive.
- Airlines, including IndiGo and Air India, have consistently requested government action regarding VAT and fuel expenses.
“A reduction in VAT will have a direct impact on operational expenses, allowing airlines to offer more competitive fares and expand their networks,” said a top airline executive, requesting anonymity.
ATF Prices on the Rise
With ongoing Middle East tensions, ATF prices have increased. IOCL data from March 1, 2025, indicates Delhi ATF costs ₹95,311 per kilolitre for domestic flights and $848.32 per kilolitre for domestic airlines operating internationally.
Preserving Delhi’s Economic Activities
- Assocham advocates for VAT reduction to preserve Delhi’s economic activities. “If airlines find a more cost-effective alternative, there is a risk that flights and related business activities may shift away from Delhi, impacting jobs and the local economy,” a source said.
VAT on ATF remains under state jurisdiction. A Rajya Sabha response dated March 24 confirms 28 states/UTs implement ATF VAT at 5% or below.
“This will impact Delhi airport due to prohibitive cost differences, making it uncompetitive and affecting ATF sales and government revenue. Considering Delhi is one of the busiest airports in the country, I urge the Delhi government to reduce VAT on ATF to 1-4% to boost air travel and its economic benefits,” the minister said.
