Airlines in India have "limited freedoms" to operate as true commercial businesses and the country is a challenging market for the carriers despite the huge aviation potential, according to global airlines' grouping IATA.

The comments from the International Air Transport Association (IATA), which has nearly 290 airlines as members, also comes at a time when Jet Airway has temporarily closed down its operations due to cash crunch.

Jet Airways is also a member of the IATA.

Albert Tjoeng, Assistant Director of Corporate Communications (Asia Pacific) at the IATA, said that while the aviation potential of India is huge, it is a challenging market for airlines.

"Airlines have to deal with high operating costs – fuel, taxation, airport charges - in a very competitive environment. Fuel costs makes up 34 per cent of operating costs of Indian carriers when the industry average is about 24 per cent.

"Coupled with the depreciation of the Indian rupee, it is a double whammy for the airlines," he said in a statement.

According to him, India's regulatory and tax framework around fuel also adds a burden on the airline industry.

He also noted that there is no real competition for fuel suppliers at airports and excise duties and state taxes on fuel can be up to 30 per cent.

"Airlines have limited freedoms to operate as true commercial businesses. These issues need to be addressed to strengthen the Indian airline industry," Tjeong said.

India is one of the fastest growing domestic aviation markets in the world. Domestic carriers have been facing various headwinds, including rising operational costs, amid stiff competition.