Bengal, 1st state to waive sales tax for select airlines

The West Bengal government has decided to provide a three-year sales tax waiver on aviation turbine fuel (ATF) to airlines operating out of the coming Changi-promoted Andal airport near Durgapur, 160 km from here, and the one in Bagdogra, in Darjeeling district.

With this, Bengal becomes the first state to bring down the contentious sales tax imposed on ATF to zero, something domestic airlines have been demanding for many years.

Airlines say ATF fuel prices in India are 40 per cent higher than in countries such as Singapore. Jharkhand, Chhattisgarh and Maharashtra (except in Mumbai and Pune), have brought down sales tax on ATF to four per cent. West Bengal has a duty of 30 per cent on ATF.

Industries Minister Partha Chatterjee said: “The chief minister has approved a three-year sales tax waiver on ATF for airlines in Bagdogra, the only operational non-metro airport in the state. This would be extended to Changi’s airport as well, as and when it becomes operational.”

Airlines say the move will help them reduce ticket prices and incentivise more passengers to fly into West Bengal. They add the dependence of airlines on the Kolkata airport (which accounts for 98 per cent of air traffic into the state) will not change fundamentally.

The chief executive officer of a top low-cost carrier said: “ATF constitutes 50 per cent of our costs, and this reduction will mean a 15 per cent reduction in out total operation costs. At a fare of Rs 4,000-5,000, the fare differential is not enough for passengers to come to Durgapur and travel to Kolkata, apart from the fact that it will take a lot of time. So, it cannot be an alternative hub.”

AirAsia promoter Tony Fernandes has been pushing state governments to built low-cost airports that offer cheaper landing and parking rates, as well as cheaper fuel. Aviation industry watchers said the move might force other states to follow a similar policy.

Bengal Aerotropolis Projects Ltd (BAPL), the special purpose vehicle that is constructing the Andal airport and would run it later, is elated. “We are grateful to the government of West Bengal for its decision,” said a BAPL spokesperson. “We are hopeful airline companies will come forward to partner us in various efforts to create better air connectivity across Bengal.”

BAPL, in which Changi has a 26 per cent stake, has been lobbying for tax incentives similar to those provided by states such as Maharashtra. It has held talks with all major domestic airline operators. Recently, it signed a memorandum of understanding with the central government-run Pawan Hans for a helicopter service based out of the Andal facility.

Changi Airport Planners and Engineers, a subsidiary of Changi Airport International, has been at the forefront of the route planning. Initially, the airport is likely to offer the Delhi-Durgapur-Delhi and Kolkata-Durgapur-Kolkata routes.

BAPL has missed several deadlines to commission the airport. According to company officials, construction at the airport site is on the verge of completion, and final approval from the Directorate General of Civil Aviation is being awaited. The airport is expected to be operational by the first quarter of next year.

After the construction at the site is completed (phase-I), at an investment of around Rs 624 crore (Rs 6.24 billion), BAPL plans to come up with an airport city with an information technology park, hospitals and a residential complex. It is estimated the airport city would involve an investment of about Rs 10,000 crore (Rs 100 billion).