Airlines to be allowed to import jet fuel, hints Patel

Written by Shaheen Mansuri | Mumbai, Sep 19 | Updated: Sep 21 2008, 05:00am hrs
There is some respite for the airline sector which has been lobbying hard for importing aviation turbine fuel (ATF) to bring down their operating costs.

Hinting that low ATF price would be beneficial for the airline and the passengers, civil aviation minister Praful Patel, on the sidelines of the silver jubilee global awards function, organised by the Priyadarshini Academy, said, The ministry is supportive in allowing the airlines to import ATF. This move will not only benefit airline companies, but also passengers who have been paying high air fares on account on high fuel costs.

If the ministry gives an approval for importing ATF, it will reduce the cost by almost 25% than what the airlines are paying to the state-owned oil companies and there will be no sales tax levied on the product. Even after the 5% import duty is paid, the price of the fuel will be lower than what is charged currently.

It may be noted that recently, the Federation of Indian Airlines (FIA) had approached the Directorate General of Foreign Trade (DGFT) for a no objection certificate to import ATF.

Currently, the cost of ATF in India is nearly 60% higher than prices globally due to the rigid sales tax regime in India.

Says R Sreesankar, head research, IL&FS Investsmart, If airlines are allowed to import ATF directly, they would stand to gain.

There is a huge disparity between international airlines and Indian carriers regarding the ATF prices. But airlines will have to consider the logistics of importing fuel, including warehousing.

Currently, the state-owned oil companies have their ATF refilling stations or the storage facility in the proximity of the airport.

Saroj Datta, executive director at Jet Airways, had recently said that if airlines are allowed to import jet fuel, the logistics will be taken care of.

Meanwhile, the Indian crude oil basked has averaged $97.59 per barrel so far this month, down 13% from Augusts average of $113.05.