Bhubaneswar, June 11 (IANS): In a bid to attract international flight operators in Odisha, the state cabinet on Thursday approved a proposal to exempt international air carriers from paying value added tax (VAT) on aviation turbine fuel (ATF).

"This incentive by the state government is a bid to strengthen the aviation network in the state and to attract international as well as domestic airline operators to Biju Patnaik Airport in Odisha," chief secretary G.C. Pati told reporters here.

The cabinet meeting was chaired by Odisha Chief Minister Naveen Patnaik.

He said while the government had reduced the rate of VAT on ATF from 20 percent to 5 percent with effect from December 1, 2013, now the government has completely exempted ATF from VAT.

"Though the ministry of civil aviation has declared the Bhubaneswar-based airport an international airport since December 1, 2013 where the domestic air connectivity has substantially improved since then, but not a single international flight has started flying," added Pati.

The government claimed that there would be no financial loss for the state following the VAT exemption as there is a possibility of an increase in certain economic activities which may widen the tax base in the state.

Many global carriers are keen to run their flights to and from Bhubaneswar airport. While, Dubai-based Flydubai has proposed to operate a daily flight from Bhubaneswar, Indigo has promised to consider extending its Dubai-Mumbai flight to Bhubaneswar and also the Bangkok-Kolkata flight to Bhubaneswar.

AirAsia has submitted schedules to run commercial operations from Bhubaneswar.

The government also approved that multi-product industries in special economic zones can be allowed to lease out their premises to other industries.