Airfares in India are expected to go up with Finance Minister P Chidambaram proposing a 48 per cent tax on aircraft leasing charges.

Airlines are expected to pass on a part of this additional burden to passengers. Besides, bringing airport services in the service tax net will also increase the cost of operations of airlines.

"The move to impose a tax on leased aircraft will increase the cost of operations for any airline. Our cost of operations will go up," said S K Datta, executive director, Jet Airways.

He, however, did not specify whether this would lead to an increase in airfares. "It is too early for us to decide on that. We will have to look at a whole host of issues," he added.

National carrier Air-India and Indian Airlines too will have to look at the issue, as the two airlines have a large number of leased aircraft in their fleets.

Of the 130 aircraft owned by domestic airlines, about 60 of them are on lease. Besides, the airlines plan to take another 50 aircraft on lease in the next 12 to 18 months. About a third of Indian Airlines' fleet comprises leased aircraft and IA is also planning to take an additional 11 Airbus A 320 aircraft on lease in the short term.

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