Why jet fuel for airlines is cheaper than petrol and diesel prices in India

It may seem as if flying planes is cheaper than driving a car in India, thanks to the recent hikes in petrol and diesel prices across the country. With fuel prices hitting all-time high more regularly than ever, the rates now have reached a level where it actually costs more than 30 per cent of aviation turbine fuel or ATF which is used to fly aircrafts and helicopters.

The petrol and diesel prices remained stable on Monday. However, Sunday was the fourth straight day when the prices were hiked, taking the rates to a new all-time high. Sri Ganganagar in Rajasthan remains the costliest place in India to buy fuel for your car or two-wheeler. Petrol price in Sri Ganganagar stands at ₹117.86 per litre, while diesel costs ₹105.95 per litre.

The ATF price, despite being hiked recently, remains much less than what petrol and diesel prices are. For reference, a litre of ATF costs just ₹79 per litre in Delhi, while petrol costs ₹105.84 for the same amount and diesel comes for ₹94.57.

The reason behind ATF price being lower than that of petrol and diesel is the way tax on these fuels are calculated. Just like the conventional vehicle fuels, ATF too attracts both central and state taxes, and it varies from state to state due to different VAT rates.

The ATF attracts central excise of 11 per cent, while VAT rates vary between zero to 30 per cent. The VAT on ATF is highest in Gujarat at 30 per cent, 29 per cent in Tamil Nadu and Bihar, 28 per cent in Karnataka. The Centre has urged all states to reduce VAT on ATF to not more than 4 per cent to reduce burden on airlines. Even at the highest possible price, the tax on ATF is not even half of the overall rate.

Compared to jet fuel, petrol and diesel price attracts a heavier tax structure. The central and state government taxes contribute nearly 60% of the petrol retail price and 54% of the diesel retail rate. Currently, the Centre levies excise duties of ₹32.80 per litre on petrol and ₹31.80 on diesel.

Besides the central government imposed excise duty and freight charges, the motor fuels also attract variable VAT amounts from different state governments and dealer commissions as well. In Delhi, the state government earns nearly ₹23 for every litre of petrol sold in the national capital in form of excise duty. In case of diesel, the amount is much less at about ₹13 per litre.

There have been efforts to bring both ATF as well as petrol and diesel under the GST regime. The move may help to substantially reduce taxes on fuel in coming days.