Airlines can now import ATF

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New Delhi, May 23: The government is planning to allow domestic carriers to import aviation turbine fuel in bulk— a move that can significantly reduce airlines’ costs of fuel and consequently lower air fares. ATF prices in India are almost 70% higher than international prices due to heavy taxation. The landed price of imported ATF is almost 40% cheaper than the domestic price.

A civil aviation ministry official said airlines would be allowed to do this using the open general licence route. This could lower the operational cost of an airline by almost 12%, an industry executive said. At present, ATF accounts for 40% of the total operational cost of domestic airlines.

The sales tax on ATF varies from 4% to 39% in India. For instance, In Delhi, of the total fuel cost of Rs 37,421 a kilolitre, sales tax alone accounts for Rs 5,663. Apart from taxes, high margins of oil PSUs — ranging between 16% and 21% — further jack up jet fuel prices. “The move will help the industry bring down its overall costs. Some of these benefits will also be passed on to consumers in terms of lower air fares,” said the CFO of a low-cost carrier.

According to the Federation of Indian Airlines, benchmarking jet fuel prices to the international level can result in annual savings of about $624 million. Meanwhile, the government is also looking at pruning the overall taxes on ATF. “The matter of high taxes will be taken up with the finance and petroleum ministries,” the civil aviation ministry official said.