Delhi imposes higher VAT on jet fuel

The New Delhi government has increased value added tax or VAT on jet fuel uplift to 25% from 20%, a move that will offset a small fraction of the benefits that airlines have been enjoying thanks to lower fuel prices.

The tax is only levied on fuel uplifts for domestic flights. A senior executive at SpiceJet said it will increase costs by up to Rs 8 crore for the industry. Delhi is India's busiest airport.

Indian aviation, a chronically loss-making sector, has gradually started to crawl back into profits, thanks primarily to a drop in jet fuel prices and a growth in passenger traffic. Fuel prices have declined by about 40% since the last quarter of 2014. At current levels fuel is expected to account for around 30%-35% of an Indian carrier's costs, compared to 45% last year, according to industry data.