The Centre has classified blended jet fuel under the Central Excise Act as a new mineral item category, while it considers whether to make its use mandatory for domestic flights in 2027 and voluntary by next year. The aviation industry is concerned that blending will increase their fuel costs, and the Centre may need to offer an incentive to get airlines to opt in on a voluntarily basis.
According to a Monday notification from the Department of Revenue, Ministry of Finance, blended aviation turbo fuel used by selected airline operators or freight operators for regional connection scheme flights under Regional Connectivity Scheme(RCS) and Ude Deshka Aam Nagrik(UDAN) will attract 2% tax, while all other blended ATFs are taxed at 11%.
Officials of the finance ministry called the move the “primary action”, and said it would make a decision only after broader consultations with other ministries, such as the ministry for civil aviation (MoCA), NitiAayog, and oil marketing companies.
According to MoCA, several airlines, including Spicejet, Indigo and Vistara, have conducted demonstration flights using SAF mixed with conventional jet fuel. Some of these airlines are already operating international ferry flights. Ferry flights within India. Air Asia plans to operate the first commercial domestic flight using 0.57 percent SAF-blend fuel.
A senior official told ET that it was premature to comment on a timeline for making the category mandatory. Testing of blended gasoline is already underway.
The decision was made based on a committee formed by the Ministry of Petroleum and Natural Gas to study SAF. The committee reportedly submitted its recommendations to government last year. SAF is considered a clean alternative to fossil jet-fuels because it has a similar chemical composition.
The official quoted above stated that the aviation sector believes the cost to produce biofuels is high. This will ultimately increase the fuel costs for the airlines who will then pass this on to the passengers. The aviation industry has expressed concerns that the introduction of biofuels at this time will increase fuel costs. This will ultimately be passed on to passengers, according to the official cited above.
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