Air India is set to get a discount of 8-8.5% on purchase of aviation turbine fuel from state-owned oil marketing companies, which will help reduce the national carrier’s fuel bill by R700-800 crore.
Negotiations, which were on between the civil aviation ministry and petroleum ministry, have been concluded and the discounted rates will be on a retrospective basis from January 1, a senior Air India official said. ?We will be paying off most of the oil dues with the equity infusion from the government announced in the Union Budget 2012-13,? the official said.
?By doing so and through the efforts of the inter-ministerial negotiations, we have been able to get this discount”.
Air India owes state-owned oil marketing companies Rs 4,324 crore, but a bulk of this will be paid off from the Rs 5,000-crore infusion from the government.
As part of the fuel discount, Indian Oil Corporation will offer a discount of Rs 5,300 per kilolitre, while HPCL and BPCL will give a discount of Rs 5,500 each. Such discounts are normally given to airlines that adhere to payment schedules.
While the discount will come as a boon for the national carrier in the midst of a turnaround, margins on ATF sales for state-owned oil market companies are set to be impacted. The ATF market in India, which was earlier growing at around 6-7 % a year, contracted 4.8% in 2012-13, with Kingfisher curtailing operations, the Air India reeling under a strike and a slump in airlines growth making a lot airlines rationalise their routes.
Jet fuel prices have already corrected due to softening of international crude oil prices. IOC has reduced ATF prices by nearly 11% since March, when prices were at Rs 70,080.87/Kl in Delhi. OMCs revise ATF prices at the start of every month, based on the average international price in the preceding month.
IOC, which is the country’s largest ATF supplier with a 65% market share, sells jet fuel for Rs 62,649.95 per kilo litre in Delhi as of May 1. Of the 5.5 million tonne of ATF produced in the country it accounts for 3.5 mt. The state run fuel retailer, which has 97 aviation fuel stations and supplies to 80 major international airlines, will take the biggest hit from rebates to Air India.
BPCL is the number two ATF supplier, with about 22% of the market share in the country?s ATF market.
