Following the withdrawal of customs duty on aviation turbine fuel last week, state-run oil firms on Monday slashed prices of the fuel by Rs 2,100 per kilolitre (kl). This will be on top of the 17% reduction in ATF prices announced last week.
?On an average, domestic airlines will have to pay Rs 2,100 per kl less for ATF with effect from midnight tonight. For international airlines (which do not pay local sales tax or VAT), the reduction would be $ 35 per kl,? an industry source said.
Consequently, ATF in Mumbai, home to the country?s busiest airport, will cost Rs 46,518.85 per kl as against Rs 48,656.59 per kl presently
However passengers will have to wait a bit longer before airfares start falling. ?We will wait and watch how this works out, before taking a decision on fares,? an official with a domestic airline said. Most airlines said they would study the impact before taking any decision.
The finance ministry last Friday had abolished the 5% import duty on ATF. On the same day, Indian Oil, Bharat Petroleum and Hindustan Petroleum had cut jet fuel prices in Delhi by Rs 9,429.87 per kl to Rs 47,017.93 per kl, in line with the falling international oil prices?the third such reduction. Cumulatively, prices are down close to 40% from the peak reached in August.
While ATF is not imported into the country, the price of domestically produced fuel is based on import parity price. Apart from the customs duty, the fuel also attracts an 8% excise duty and local sales tax averaging at 25%.
The further reduction in ATF prices will spell good news for the domestic aviation industry that has been reeling from high fuel costs and lower ridership. ?Any reduction in jet fuel prices will certainly be helpful to airlines,? the official said.
ATF prices in India are currently 60-70% higher than the international prices and constitute about 40% of the cost of airlines on account of the large number of taxes and state levies.