New Delhi: After UPA chairperson Sonia Gandhi's stamp of approval to fuel price hike and service tax in the Union Budget 2010 here on Thursday, air fare and freight charges are likely to go up by next week.
The airline CEOs say they cannot absorb the service tax levied in the Budget.
"The service tax remains and airlines will have to pass on the burden to air travellers," said chairman of Kingfisher Airlines Vijay Mallya.
"Clearly the airlines are in no position to swallow these increases without passing them on. At least, I am speaking on behalf of Kingfisher. But we have to assess the exact impact and see whether we can balance the increased cost with some input creidt where service tax is concerned and then we will take a decision. Probably, some time next week on what we should do," said Mallya.
"If you ask me what our preference would be, no service tax of course because we are in the business. We came to the business to provide affordable air travel to the consumer. So if we could have it our way, we would rather keep the fares as low as possible where the customers are happy. And, the airline can give a sustainable level," says Spice CEO Sanjay Aggarwal.
Civil Aviation Minister Praful Patel and and Railways Minister Mamata Banerjee are not happy. Along with air fare, freight charges could also rise by 6-7% with a service tax on Indian Railways. Both the ministers have asked for a rollback.
Patel says he will ask the Finance ministry to do away with the service tax levy.
"On behalf of the sector, on behalf of the airline industry, we as the Minister of Civil Aviation will take up with the Finance ministry the issues of service tax that has recently been levied," said Patel on Thursday.
"Also, I hope that the Finance ministry may be able to consider our request more favourably," he added.
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