India, March 26 -- The Delhi government would do well to respond positively to the Union civil aviation ministry's suggestion on reducing the value-added tax (VAT) it charges on aviation turbine fuel (ATF). Delhi airport saw a record 80 million passengers last year despite a 25% VAT on ATF, but this could change once the new airport in Jewar in Uttar Pradesh (UP) becomes operational. UP has said it will be charging a much lower 1%; indeed, 25 states and Union territories charge VAT between 1% and 4%.

Given the large share of fuel in an airline's operating costs - 40-45% as per one estimate - high VAT rates such as Delhi's will mean that airlines may choose to fly to and refuel at a National Capital Region (NCR) airport with lower rates, ...