TNN

New Delhi, Dec 2: In a move that may force private full service carriers to pass on benefits to customers of a hugely cheaper jet fuel by dropping fares, national carrier Air India has decided to reduce fuel surcharge by Rs 400 on all its domestic flights from Tuesday. And since AI-domestic (earlier Indian Airlines) does not levy the congestion charge of Rs 150, its taxes and surcharge component per ticket are now lower by Rs 550 compared to other full service Indian carriers Jet and Kingfisher.

The fuel surcharge for short flights (like Delhi-Lucknow or Goa-Mumbai) will now be Rs 1,950, down from Rs 2,350. Other domestic flights (like Delhi-Mumbai) will now have a fuel surcharge of Rs 2,700 instead of the earlier Rs 3,100. The logic to do so: boost the sluggish air travel this winter a peak travel season.

AI CMD Raghu Menon said, "We have decided to bring down the fuel surcharge, now that crude prices have fallen globally, thereby bringing down ATF prices. Although crude prices are still volatile, we hope it will stabilize at the current levels... While airlines are going through difficult times, it is necessary for us to react positively to pass on some concession to passengers and generate demand."

When contacted on Monday, Jet and Kingfisher said they have no plan to alter fares as of now. Kingfisher chief Vijay Mallya had last Monday stated that he would reduce fares when aviation turbine fuel is notified a declared good so that it attracts a uniform 4% sales tax across the country. Low cost carriers (LCC) like IndiGo and SpiceJet are mulling a cut but are yet to make a formal announcement.

ATF prices have now fallen by almost half from the alltime high it hit in August. In Delhi, for instance, price is down by 48% from Rs 71,028 to Rs 36,900 per kilolitre now. However, full service carriers were till now citing huge losses to reduce fares that they kept hiking in past few months when ATF prices were touching dizzying heights.

Now Air India has taken the lead by beginning to lower fares and try give a boost to domestic air traffic that is now all set to register a negative growth this year over 2007. "Airlines can't say they'll reduce fares only if ATF becomes a declared good. With AI taking the lead, other full service carriers will also be be forced to lower fares," said a senior ministry official. It remains to be seen if the coming Parliament session would be able to amend the Central Sales Tax Act to notify ATF as declared good as the government's priorities have changed following the Mumbai attack.