High ATF tax in Delhi vs 1% in UP: Jewar airport launch sparks airline cost concerns

The inauguration of the Noida International Airport at Jewar has drawn attention to a long-standing issue in Indian aviation — the sharp difference in state taxes on jet fuel and how it could influence airline operations in the National Capital Region. Prime Minister Narendra Modi is set to inaugurate the first phase of the airport, which is expected to ease congestion at Delhi’s Indira Gandhi International Airport (IGI) and boost connectivity in the region. However, the launch has also intensified concerns about the tax differential on Air Turbine Fuel (ATF) between Delhi and neighbouring Uttar Pradesh.

At present, Delhi imposes around 25% Value Added Tax (VAT) on ATF, while Uttar Pradesh levies only about 1%, creating a large cost gap for carriers. Since aviation fuel accounts for nearly 30–40% of airline operating costs, even small tax changes can significantly affect profitability, a report in CNBC TV18 noted.

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The difference becomes more pronounced when calculated per flight. With jet fuel priced at roughly ₹96,000 per tonne in Delhi, the 25% VAT adds about ₹24,000 per tonne, while in Uttar Pradesh the tax adds less than ₹1,000. A typical narrow-body aircraft on a Delhi–Mumbai route consumes about four tonnes of fuel, meaning airlines could pay nearly ₹96,000 extra per flight if refuelling in Delhi instead of Uttar Pradesh, as per the report.

Airport officials warn that such a gap could encourage airlines to shift fuelling operations to Jewar or gradually move capacity to airports with lower taxes. Over time, this could affect traffic distribution within the NCR aviation network, especially once the new airport becomes fully operational. Estimates suggest that a noticeable portion of traffic could move away from IGI if the tax structure remains unchanged.

Industry stakeholders argue that fuel taxation is not only a cost issue but also a strategic factor that determines whether an airport can function as a competitive hub. Airports with lower operating costs tend to attract more flights, which in turn strengthens connectivity and passenger traffic.

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The new airport, located along the Yamuna Expressway in Gautam Buddha Nagar district, is being developed as the second international gateway for the NCR. While the project is expected to increase passenger capacity and improve logistics connectivity, industry officials say differences in fuel taxation could create an uneven cost structure for airlines operating from the two airports.

With Jewar set to begin operations, the timing of the debate has become critical. Airlines are expected to review their cost structures and network plans, and fuel tax differences could play a major role in those decisions.