ATF Price Surge: Why Airlines Seek Tax Cut, Pricing Change Amid Crisis

📌 Summary:

• Federation of Indian Airlines (FIA — IndiGo, Air India, SpiceJet) sent SOS to Ministry of Civil Aviation (MoCA) over ATF (Aviation Turbine Fuel) price surge

• Trigger: West Asia war caused global crude and ATF prices to surge; India's ATF prices are linked to global prices and due for monthly revision in May 2026

• FIA letter: Airlines "on verge of closing down"; current pricing mechanism creates "severe imbalance between domestic and international operations"

• Policy issue: Government gave domestic airlines only partial protection — 25% (Rs 15/litre) subsidy while international operations face full ATF price increase; FIA demands uniform treatment

• FIA demand: Restore Crack (margin) Band mechanism to cap price differential between domestic and international ATF

• Tax structure: Excise duty under Centre's control; VAT is state government's prerogative — Delhi VAT 25% (2nd highest), Tamil Nadu 29% (highest); top 6 cities cover 50%+ of airline operations

• Centre has been urging states to reduce VAT on ATF for years; some states have complied, others (including large airport cities) have not

📌 UPSC Relevance:

• GS3: Aviation sector, fuel pricing policy, Centre-State fiscal relations (VAT)

📌 Prelims Facts:

• ATF: Aviation Turbine Fuel; excluded from GST — priced by PSU oil companies monthly

• FIA: Federation of Indian Airlines (industry body)

• Crack spread: Difference between crude oil and refined product prices; basis for ATF pricing margins