Article Posted on : - Dec 17, 2008

File photo of Civil Aviation minister Praful Patel. PIB photo

NEW DELHI (BNS): Building pressure on private airlines the Indian government said it must cut fares after the prices of aviation turbine fuel (ATF) has come down significantly in recent months to make flying more affordable.

Indian Civil Aviation Minister Praful Patel said in New Delhi that there was no reason why air fares should remain high. The government wants airlines to come forward and pass the benefit to passengers. It claimed that when the industry was in doldrums, government announced a slew of measures to bail out the loss making airlines.

Patel said now it is imperative that airlines respond to the situation and reduce fares. The minister informed Parliament that the government was taking measures to ensure that the benefit of reduction in ATF prices was passed on to the consumers.

The Indian federal government has also asked state administrations to reduce local taxes on ATF so that airlines can cut fares. The government has appealed to private airlines to reduce fares ever since the fuel prices stabilised in the international market.

The two major airlines, Jet Airways and Kingfisher, have indicated that it would slash prices to some extent in the coming days. It became easier to take the decision as the oil companies, owned by the government, have reduced fuel prices by over 11 per cent since August when it touched the peak of Rs 71,028.26 kl in Delhi.

Fuel price is one of the major cost components for the airlines. Many have argued that it would be impossible to remain in business if the ATF continues to be high. For the airlines, the business has become a double-edged sword. The number of passengers goes down if the fare remains high and they are simply not in a position to cut prices as they have already incurred heavy losses.

There is a growing view that the airlines were being bailed out at the cost of tax payers. The passenger flow has come down significantly with all the airlines registering a drop. High fares are one of the most prominent reasons for reduction in passenger flow. The economic downturn too has affected business travellers.