Delhi, Mumbai slash VAT on ATF to 7 per cent as airlines face rising fuel costs

In a major relief to the Indian airlines, reeling under the impact of high price of aviation turbine fuel (ATF) in the wake of the Iran war, a weakening Rupee against the US dollar and steep operational expenditure, Delhi and Mumbai have significantly reduced VAT on ATF.

VAT cuts announced in Delhi and Mumbai

While Delhi has brought down VAT from 25 per cent to 7 per cent on ATF for six months, the Maharashtra government has deceased VAT in Mumbai on jet fuel from 18 per cent to 7 per cent, reported NDTV.

Also Read: No change in ATF price for domestic airlines; petrol, diesel, LPG rates steady

The development comes days after the airlines told the Centre that the ongoing fuel crisis was threatening the economic viability of several routes.

The Federation of Indian Airlines (FIA), representing Air India, IndiGo, and SpiceJet wrote to the Ministry of Civil Aviation on April 26, stating that ATF costs accounts for 55 to 60 per cent of operating expenses as compared to 30 to 40 per cent before the West Asia conflict escalated.

Fuel pressures and rising costs

The sharp increase in oil prices came in the wake of disruption of global fuel supply due to the tension over the Strait of Hormuz which accounts for almost 20 per cent of global oil and LNG supplies through shipping.

Also Read: Air India, IndiGo, SpiceJet approach Centre, seek duty cut on ATF

The price of ATF in the international market also surged from USD 99.4 dollars per barrel at the end of February to USD 162.89 dollars per barrel for the week ending May 8, 2026.

Delhi and Mumbai remain the two most important centres in India's aviation industry and account for a substantial share of the country's passenger traffic, aircraft movements and airline hub operations.

Why the two airport hubs matter

Delhi's Indira Gandhi International Airport handled close to eight crore passengers during 2024-25, according to figures cited by Chief Minister Rekha Gupta, while Mumbai airport recorded 55.5 million passengers and more than 331,000 aircraft movements in 2025.

Also Read: Goyal asks Cong-ruled Karnataka, Kerala and Telanagana to cut VAT on ATF

Together, these airports support a significant portion of premium domestic travel, international operations and connecting traffic across airline networks.

The concentration of aviation activity at these two hubs means airlines purchase large volumes of aviation turbine fuel every day, making any reduction in taxation considerably more meaningful than similar measures at smaller airports, reported NDTV.

Scale of ATF demand in India

The report further stated that government figures indicate the scale of demand. Data from the Petroleum Planning and Analysis Cell (PPAC) showed India consumed nearly 764 thousand metric tonnes of ATF during February 2026 alone, while DGCA figures showed domestic airlines carried around 167 million passengers in 2025.