CHENNAI: IndiGo and Air India are planning to expand their services to Tamil Nadu following the state government’s decision to cut value-added tax (VAT) on aviation turbine fuel (ATF) from November 1, a move expected to improve connectivity and encourage airlines to deploy larger aircraft on busy routes.
The state government has reduced ATF VAT from 29% to 16% at Chennai airport and to 1% at other airports in TN.
An IndiGo spokesperson said the airline was looking to increase flight frequencies and deploy larger aircraft on routes with higher passenger demand. However, it was too early to specify the number of additional flights, as the decision would depend on various factors.
An airline executive said discussions were under way, adding that further growth would depend on airport infrastructure. IndiGo and the state government are scheduled to hold talks on Thursday.
An Air India official told TNIE that the airline had been planning to expand its operations and had held discussions in phases after the tax announcement. But, no specific numbers had been discussed, and the timeline for expansion remained uncertain as the airline’s head office was still working out capacity plans.
An airport official said the VAT reduction in Chennai would help strengthen its position as an aviation hub, attract more airlines, improve connectivity and expand domestic and international air traffic.
The state government is also understood to be in talks with several airlines to improve connectivity to airports across TN. Sources told TNIE that the discussions were being conducted through the CM’s Office.
M Ponnuswami, co-chairman of the Confederation of Indian Industry’s National Taskforce on Ease of Doing Business, said the tax cut could encourage airlines to deploy Airbus A320 aircraft on intra-state routes.
K Vaitheeswaran, chair of the Indirect Tax Expert Committee and governing council member of the Madras Chamber of Commerce and Industry, said the reduction would lower airline operating costs. The savings could translate into lower passenger fares or air freight rates, he added.
Bhupesh Nagarajan, co-chairman of the FICCI TN State Council, said additional flights could boost demand for airport employees, tourism operators and local suppliers.