IOC favours duty drawback on sale of ATF, other products

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Mumbai, May 15: The state-run Indian Oil Corporation (IOC), which is struggling to cope up with burgeoning under-recoveries, has made a strong pitch for a duty drawback for various petroleum products including aviation turbine fuel (ATF), to become competitive.

IOC, in its presentation to the petroleum ministry, has argued that there was a need to have duty drawback rates for these supplies in order to make the supply of petroleum products internationally competitive so that the element of customs duty paid on crude oil does not hamper the competitiveness of Indian oil marketing companies (OMCs), and hence, the supply of liquefied petroleum gas (LPG), motor spirit (MS), high speed diesel (HSD), superior kerosene (SKO), and ATF to adjoining countries.

Informed sources told FE that IOC had called upon the petroleum ministry to consider making the all-industry rates of duty drawback -- which are at present only available for supply of fuel oil and high speed diesel to special economic zone (SEZ units) -- available on supply of ATF to international airlines and bunker fuel to international shipping lines.

According to IOC, due to the growth of the Indian economy, international flights in and out of India are increasing. The price of ATF and bunker fuel was on the higher side on account of the element of customs duty paid on crude oil. As the price of ATF at Indian airports and seaports is uncompetitive, the international airlines and shipping lines are disinclined to take supplies at Indian airports and seaports.

IOC’s plea is also crucial especially when the demand for ATF rose in the fiscal 2007-08 mainly due to a large number of people going in for air travel.

A total of 4,556.1 TMT of ATF was sold in FY2007-08 as compared to 3,982.6 TMT in FY2006-07. Industry sources also admitted that ATF consumption demonstrates consistent growth on account of the continuing boom in the aviation industry.