ATF costs account for 45% of air ticket prices, says Minister

The cost of aviation turbine fuel (ATF) makes up 45% of airfare prices, Civil Aviation Minister Ram Mohan Naidu told the Lok Sabha on Thursday, March 27, 2025, noting that some States, including Tamil Nadu, charge a high 29% value added tax (VAT) on it as well.
| Photo Credit: SIVAKUMAR PV

The cost of aviation turbine fuel (ATF) makes up 45% of airfare prices, Civil Aviation Minister Ram Mohan Naidu told the Lok Sabha on Thursday (March 27, 2025), noting that some States, including Tamil Nadu, charge a high 29% value added tax (VAT) on it as well.

“There are some States which are charging up to 29% VAT on ATF, and Tamil Nadu is one such State which has the highest ATF in the country,” the Minister said. While 15 States have reduced VAT on ATF below 5%, others continue to impose higher rates, impacting airline operations and passenger fares, he added.

Mr. Naidu said that the Directorate General of Civil Aviation (DGCA) monitors air fare prices and requires airlines to submit a tariff sheet periodically. Earlier, airlines were required to submit a tariff sheet at the start of the summer and winter season, and had the liberty to change their tariffs, but they are now required to submit the tariff sheet every month and cannot make any tweaks to it.

His remarks in Parliament come at a time when the DGCA is examining aggregate data on airfares for the past two years submitted by airlines, following complaints of a sharp spike in ticket prices for flights to Prayagraj during the Kumbh Mela.

‘More aircraft will lower fares’

In response to a question from DMK MP A. Raja on why the government was not making efforts to inject more competition into the sector — an oblique reference to the duopoly in aviation, where IndiGo and Air India account for 91% of domestic air travellers — the Minister said that more competition will certainly help bring down airfares and so would more aircraft.

In 2014, there were 340 aircraft, which has grown to 840 aircraft now, said Mr. Naidu. Airlines also have orders for 1,700 more aircraft because of a massive demand for travel, he said, pointing out that the 10% rate of yearly growth in passengers in India was the highest in the world.

To help airlines bring more aircraft into the country, the government is promoting leasing through GIFT City in Gujarat instead of overseas, Mr. Naidu said, noting that 200 planes have been so far leased from there.

The Minister said that the government has also tabled a Bill to ratify the Capetown Convention and Protocol to resolve disputes between airlines and lessors over aircraft, engines and other parts. This will further lower leasing costs for airlines by 8% to 10%, with the benefit of these various steps trickling down to passengers in terms of lower airfares, he said.