ATF prices continue to be a vexing issue

New Delhi: With aviation turbine fuel (ATF) prices in India higher by 60 per cent than elsewhere in the world, legacy carriers are now urging the Central government to once again permit them to import ATF directly. Last time they were allowed to do so directly, was for a brief period in 1995-96. This had resulted in operating costs coming down considerably for airlines, and fares dropping accordingly.

However, it would appear from media reports that, if at all, the Government may permit import of up to 10 per cent of an airline's overall fuel consumption.

In this regard, it is pointed out that ATF sales tax varies from state to state, at levels ranging from 26% to 30%. These rates are topped with an 8% excise duty, which result in India having the highest duty structure on aviation fuel in the world. Indian ATF prices are 60% higher than global aviation fuel prices.

According to analysts, overall, the airline industry can save up to $450 million if allowed to procure fuel at international prices. Currently, only public sector oil companies like Indian Oil, Bharat Petroleum Corporation, etc, have the necessary fuel storage and hydrant systems at the airports.

The situation, however, is set to change, with the civil aviation ministry, as part of the new aviation policy, taking steps to dismantle monopolies and providing all eligible suppliers of ATF equal access to the ATF supply system, including foreign ones. Hyderabad International Airport Ltd has already awarded the contract for fuel farm operations to private sector giant, Reliance Industries Ltd.