The UPA government has failed to fulfil the wishes of the aviation sector in the interim Budget 2009-10, say airline operators. The sector, which did not receive any stimulus in the economy booster packages announced by the governments recently, was high on hopes that the government will give them a sales tax relief on the aviation turbine fuel (ATF) which they purchase from the oil marketing companies. The current sales tax on ATF is 26% in Mumbai, 20% in Delhi, which accounts for almost 25% of the total passenger traffic in India. Airlines do almost 20% of the total fuel tankering from the national capital. Only a few states like Andhra Pradesh and Kerala have bought it down to 4%.

For the past two years, the sector has been crying hoarse of the unilateral sales tax structure on ATF, which varies state to state. Says an executive from a full service carrier, "Though ATF prices have been further reduced by 4% with effect from February 15, it cannot be immediately passed on to customers in the short term. We have also not got any respite from the government in the form of uniform sales tax of 4% on ATF across the country. If the government would have acted decisively to encourage the sector, we would have got some tax relief which in turn would have passed on to the end-consumer and the sector would have gradually regained its importance."

Industry observers say that the airlines though have not officially reacted to the interim Budget 2009-10, might think of importing ATF directly rather then buying it from state-owned oil marketing companies. Federation of Indian Airlines (FIA), the apex body comprising all airlines has already mooted the idea of importing ATF that will help the sector shave off nearly 15% of their bloated fuel bills and will also help the airline curtail its mounting losses. Under government rules, if a domestic carrier imports fuel directly for its own captive usage, it does not have to pay sales tax. The only tax it needs to pay is a 5% towards import duty.