Delhi International Airport Ltd (DIAL) has written to both the Civil Aviation Ministry and the Delhi Chief Minister, seeking urgent rationalisation of the Value Added Tax (VAT) on Air Turbine Fuel (ATF), warning that the current structure risks eroding the competitiveness of the national capital’s primary gateway.
At the heart of the concern is a stark tax differential: Delhi levies 25% VAT on jet fuel, while neighbouring Uttar Pradesh charges just 1%, a gap that could significantly alter airline behaviour once Jewar becomes fully operational.
The math, airport officials argue, is simple but consequential.
- ATF price in Delhi per tonne: ~₹96,000
- VAT in Delhi (25%): adds ~₹24,000
- VAT in UP (1%): adds just ~₹960
This translates into a substantial per-flight cost differential, especially for narrow-body aircraft that consumes about 4 tonnes of fuel for a Delhi-Mumbai flight adding ₹96,000 per flight versus ₹3,840 per flight for fuelling at any airport in Uttar Pradesh.
Airlines, which operate on razor-thin margins, are highly sensitive to such cost variations. Lower fuel taxes at Jewar could incentivise carriers to tanker fuel there or shift capacity over time.
The airport operator has gone a step further, warning of a measurable traffic diversion once Jewar ramps up.
“This could prompt an anticipated traffic shift of 13–16% over a period from IGI Airport to other lower-tax airports in the region, particularly the upcoming Jewar Airport.” Delhi Airport said in its request.
Such a shift would not just impact airport revenues, but also Delhi’s positioning as a major aviation hub.
DIAL underscored that fuel taxation is not just a cost issue, but a strategic one tied to hub competitiveness:
“A cost-competitive fuel environment is essential for any airport aspiring to serve as a hub.”
The letter also highlights IGI’s economic significance, citing an independent assessment:
“The airport accounts for 17.89% of Delhi’s GSDP and supports more than 1.5 lakh jobs.”
Call for urgent parity
DIAL has urged the Delhi government to align ATF VAT with neighbouring states to prevent a structural disadvantage.
“We earnestly request you to reduce VAT on ATF in Delhi from 25% to preferably within the 1% to 4% range in line with UP Government.”
The operator argues that such a move would help preserve Delhi’s hub status while supporting broader national aviation goals.
Why this matters now
The timing of the appeal is critical. With Jewar airport being inaugurated and commercial operations set to begin, airlines could recalibrate network and cost strategies.
Fuel typically accounts for 30–40% of airline operating costs, but in volatile environments, it can spike sharply, making tax arbitrage between airports even more attractive.
In effect, what appears to be a tax policy decision could end up reshaping airline economics and airport competition in North India.
