FIA seeks extension of 7% VAT on aviation fuel in Delhi

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Airlines cite rising fuel costs; ATF uplift up 40% since tax reduction

By Rohit Vaid

Updated - October 21, 2026 at 06:24 PM. | New Delhi, Oct 21

India’s airline industry has sought continuation of the seven per cent Value-added Tax (VAT) on Aviation Turbine Fuel (ATF) in Delhi beyond November 16, citing sustained pressure on carriers’ finances amid the West Asia crisis.

In an October 19 letter to Delhi Chief Minister Rekha Gupta, the industry body Federation of Indian Airlines (FIA), representing IndiGo, Air India and SpiceJet, said that the reduced tax rate has provided meaningful support to carriers during an exceptionally challenging period.

According to the letter reviewed by businessline, ATF now accounts for around 50–55 per cent of airlines’ operating costs, against the usual 30–40 per cent, placing significant pressure on profitability, cash flows and operational resilience.

Besides, FIA said that ATF uplift in Delhi has increased by 40 per cent since the reduction in VAT.

Fuel Uplift

As per the federation, continuation of the lower rate would support higher fuel uplift and corresponding VAT collections, alongside wider economic benefits.

The request comes as the industry continues to face uncertainty over the resolution of the West Asia crisis, with airspace restrictions and diversions adding to operating expenses.

“Additionally, airspace restrictions and diversions have led to longer flight routings, higher fuel burn, increased crew costs, lower aircraft utilisation and, in several cases, leading to curtailment or reworking of operations,” the letter said.

Furthermore, the continuing uncertainty has made ATF sourcing, budgeting and network planning significantly more challenging for airlines.

Rupee Pressures

Beyond jet fuel prices, depreciation of the rupee has compounded these pressures, given that several major expenditure heads, including fuel, aircraft leases, maintenance and insurance, are substantially exposed to currency fluctuations.

Additionally, FIA maintained that airlines have continued efforts to preserve connectivity and provide safe and reliable services despite these challenges.

However, the prolonged increase in operating costs and geopolitical uncertainty are putting pressure on the sector’s financial sustainability.

The federation also pointed to potential benefits for tourism, hospitality, employment and allied sectors, while strengthening Delhi’s competitiveness as a major aviation hub.

Price Hikes

At present, ATF prices in Delhi stand at around ₹137 per litre following the October 1 revision, which marked the third consecutive monthly increase.

In addition, prices rose by about ₹16 per litre in October, following increases of ₹6.28 per litre in September and ₹5 per litre in August.

Earlier, in May, the Delhi government reduced VAT on ATF from 25 per cent to 7 per cent for an initial period of six months.

The relief was introduced amid geopolitical tensions and rising fuel costs to support airlines operating through the national capital.

Published on October 21, 2026

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