These two measures would go a long way in fuelling the growth of aviation industry in the country, CII said in a statement.

"In other countries fuel cost is 10-15 per cent of airline operating cost, whereas in India it accounted for about 30 per cent. The average price of ATF for domestic airlines is Rs 19,811 per kilo litre as against an international average of Rs 10,192 per kilo litre," a statement said, quoting CII president Sunil Kant Munjal.

One of the factors that contribute to higher price of ATF is high sales tax levied on ATF by state governments, he added.

As per the White Paper on VAT, ATF would be outside the purview of VAT and a state would be free to tax ATF at any rate. This would mean that high rate of state tax on sales of ATF would continue even after the implementation of VAT on April 1, Kant said.

The government should extend the provision in the Central Sales Tax Act of treating ATF sold to turbo-prop aircraft as goods of special importance so that states cannot levy sales tax of more than 4 per cent on it, Kant said.

"This would help in reducing the operating cost and make Indian aviation competitive."

CII also asked for continuation of tax exemption on aircraft engines and aircraft leasing to enable carriers to replace old aircraft and strengthen their expansion programmes.