India’s two biggest aviation hubs, Delhi and Mumbai, have slashed taxes on aviation turbine fuel (ATF), giving airlines much-needed relief as soaring jet fuel prices, rupee weakness and geopolitical tensions squeeze the sector.
Delhi cut ATF VAT from 25% to 7% for six months, while Maharashtra reduced Mumbai’s rate from 18% to 7% for domestic flights. The move carries significant weight because the two hubs account for a major share of India’s passenger traffic, international connectivity and daily aircraft refuelling.
The relief follows industry warnings that surging fuel costs were threatening route viability. Airlines told the government that fuel expenses had jumped to 55–60% of operating costs, up from 30–40% before the Iran conflict intensified. Disruptions around the Strait of Hormuz pushed global jet fuel prices sharply higher, worsening pressure on carriers already battling aircraft shortages, rising lease costs and maintenance issues.
Industry experts say lower taxes at Delhi and Mumbai could save airlines substantial amounts, especially major hub operators like Air India and IndiGo. The move may also reduce “fuel tankering”, carrying extra fuel from lower-tax airports, improving efficiency and route economics.
However, passengers may not see immediate fare cuts. Strong travel demand and limited aircraft supply mean airlines are more likely to use the tax relief to absorb costs and protect margins rather than significantly lower ticket prices.
The development has also revived long-standing demands to bring ATF under GST, with airlines arguing that a uniform tax structure would reduce cost distortions and simplify operations across India’s aviation sector.