The BIAL consortium, promoters of the new Bengaluru International Airport (BIA), have a strong plan to make their airport a major aviation hub, for domestic and international airlines.
Its strongest competition is coming from the GMR promoted Rajiv Gandhi International Airport (RGIA) in Hyderabad.
Unfortunately for BIAL, successive governments in Karnataka are addicted to oil, or at least the revenues their high sales tax rates bring in. Karnataka has one of the highest rates of tax on petroleum products in India, and Aviation Turbine Fuel (ATF) is no exception.
While Andhra Pradesh and Kerala (home to Cochin International Airport), have sales tax rates on ATF at the ‘declared goods’ rate of 4%, Karnataka continues to levy a budget busting 28% sales tax on ATF. This dent in the wallets of airlines, makes Bangalore a less attractive destination.
Coupled with the higher costs of operating from BIAL, airlines are thinking hard on expanding operations at Bangalore, and that lessens our choices and weakens our economy as a whole.
May be the next finance minister of Karnataka will take a cue from a former finance minister, who proved that reducing income tax rates raised consumption and compliance, and kept the actual tax collected the same.
Dr. Manmohan Singh, please talk some sense in to the administrators of Karnataka, and while you are at it, may be the 4% can be applied to all petroleum products.
Ultimately, if we Bangaloreans, spend less on fuel and transport, we will spend on more productive goods and services that will ripple-benefit Karnataka’s economy.
Entering into a competition with GMR to reduce the 24 % tax on ATF to 4 % is not only not practical but will be a big drain on the state coffers. Even the AP govt is considering repealing the rediculously low tax and it was a ploy to make headlines in the face of stiff competetion from BIAL.