New Delhi: The Delhi government is actively evaluating a proposal to slash taxes on aviation turbine fuel (ATF), petrol, diesel, and natural gas in a move aimed at sustaining competitiveness and addressing fiscal shortfalls. Senior officials indicated that a decision could be finalised before the end of April. At the heart of the discussion is a significant cut in value-added tax (VAT) on ATF, from the current 25 percent to around 10 per cent. Officials say the step is critical to retaining Delhi’s aviation advantage as neighboring Uttar Pradesh’s upcoming Noida International Airport prepares for takeoff later this year with just 1 percent VAT on ATF.
The Indira Gandhi International Airport (IGIA), managed by GMR Group, remains India’s busiest, handling over 73 million passengers in FY24. But the anticipated launch of the Noida airport, especially with its tax advantages and proximity to eastern Delhi and nearby towns, poses a growing threat to IGIA’s traffic share.
“There’s mounting pressure on the Delhi government to create a level playing field for airlines, especially as fuel accounts for nearly half of an airline’s operational costs,” said an official familiar with the developments. Airline operators have consistently flagged high ATF prices in Delhi, citing reduced competitiveness compared to other states. Aviation stakeholders, including DIAL CEO Videh Kumar Jaipuriar, have voiced concerns over shrinking capacity at IGIA and rising operational costs due to VAT and user development fees. He noted that representations had been made to both the state and central governments, urging a rationalisation of aviation fuel tax. Civil aviation minister Ram Mohan Naidu also weighed in, writing to Chief Minister Rekha Gupta in March, requesting a tax cut to align Delhi with other states offering ATF VAT rates as low as 1-4 per cent.
Meanwhile, trade associations such as the Chamber of Trade and Industry and Assocham have warned that Delhi could risk losing both airline interest and passenger footfall unless tax structures are corrected swiftly. Although the Delhi government didn’t announce any changes in its recent budget, insiders suggest that with GST and VAT collections falling short of targets, adjustments are being considered to attract more aviation and fuel-linked economic activity. As regional competition intensifies, tax reforms could become Delhi’s key to staying relevant in the rapidly evolving aviation landscape.