Delhi International Airport Ltd (DIAL) has reached out to both the Civil Aviation Ministry and the Chief Minister of Delhi, urging the immediate rationalization of the Value Added Tax (VAT) on Air Turbine Fuel (ATF). They have cautioned that the current tax structure jeopardizes the competitiveness of the national capital’s primary airport.
Central to the issue is a glaring tax disparity: Delhi imposes a 25% VAT on jet fuel, whereas neighboring Uttar Pradesh imposes only 1%. This difference could greatly influence airline operations once Jewar becomes fully functional.
According to airport officials, the math is clear but significant.
- Cost of ATF in Delhi per tonne: ~₹96,000
- VAT in Delhi (25%): adds ~₹24,000
- VAT in UP (1%): adds merely ~₹960
This results in a considerable per-flight cost difference, particularly for narrow-body aircraft, which consume about 4 tonnes of fuel for a Delhi-Mumbai flight—costing ₹96,000 per flight when refueling in Delhi compared to just ₹3,840 per flight when refueling at any airport in Uttar Pradesh.
Airlines, which operate on very tight margins, are extremely responsive to such cost changes. Lower fuel taxes in Jewar could encourage airlines to refuel there or shift their operations in the long run.
The airport operator has even highlighted the potential for significant traffic diversion once Jewar becomes operational.
“This could lead to an anticipated traffic shift of 13–16% over time from IGI Airport to other lower-tax airports in the vicinity, particularly the new Jewar Airport,” stated Delhi Airport in its appeal.
Such a transition would not only affect airport revenues but also Delhi’s status as a key aviation hub.
DIAL emphasized that fuel taxation is not merely a cost concern, but a strategic issue linked to hub competitiveness:
“A cost-competitive fuel landscape is vital for any airport aiming to function as a hub.”
The correspondence also underlines IGI’s economic importance, referencing an independent study:
“The airport contributes 17.89% of Delhi’s GSDP and sustains over 150,000 jobs.”
Urgent call for parity
DIAL has urged the Delhi government to adjust the ATF VAT to align with neighboring states to avoid a structural disadvantage.
“We sincerely request that you reduce VAT on ATF in Delhi from 25% to preferably within the 1% to 4% range in accordance with the UP Government.”
The operator argues that such adjustments would help maintain Delhi’s hub status while aiding broader national aviation objectives.
Importance of timing
The timing of this appeal is crucial. With the inauguration of Jewar airport and commercial operations on the horizon, airlines could reevaluate their network and cost strategies.
Fuel typically constitutes 30–40% of airline operating costs, but in unstable environments, prices can surge dramatically, making tax advantages between airports far more appealing.
Ultimately, what may seem like a tax policy decision could fundamentally reshape airline economics and airport competition in North India.
