The Centre has classified blended aviation turbine fuel as a new category under mineral items in the Central Excise Act, as it weighs the option to make its use voluntary for domestic flights by next year and mandatory by 2027. This comes even as the aviation industry has expressed apprehensions that blending will raise their fuel cost and that the Centre may have to offer some incentive if it wants the airlines to opt for it on a voluntary basis.
According to a notification issued by the department of revenue, ministry of finance, on Monday, blended aviation turbine fuel drawn by the selected airline operators or cargo operators for regional connectivity scheme flights under Regional Connectivity Scheme (RCS) and Ude Deshka Aam Nagrik (UDAN) scheme will attract 2 per cent excise duty, while all other blended ATFs will be taxed at 11 per cent.
Officials from the finance ministry described the move as the “primary step”, saying it will take a call after wider consultations with related ministries, including the ministry of civil aviation (MoCA), Niti Aayog and oil marketing companies (OMCs).
“This is the primary step and the category has been created; however it is premature to comment on any timeline for making it mandatory,” a senior official told ET. Testing of blended petrol is already going on.In January, the Centre had set an indicative target of 1 per cent for blending sustainable aviation fuel (SAF) with conventional jet fuel for all international flights by 2027, marking a major step towards reducing carbon emission in the aviation sector.
This was based on the recommendation of a committee on SAF constituted by the ministry of petroleum and natural gas The committee is said to have submitted its recommendations to the government last year. SAF, which has a similar chemistry to jet fuel, is considered as a clean substitute for fossil jet fuels.
However, the aviation industry feels that the cost of producing the biofuel is high, which will spike fuel costs of the airlines, who will eventually pass it on to the fliers, the official cited above said. “The industry has expressed its apprehensions and if introduced at this stage, this will spike the cost of fuel, and so all aspects must be considered before making it mandatory as this is a highly price-sensitive market,” an aviation sector executive said on condition of anonymity.
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