ATF prices in India highest in Asia Pacific region, says FIA study
15 May 2007
The price of aviation turbine fuel (ATF) in India is Rs37,800 per kilolitre, which is about 73% higher (at April'07 prices) than the international price of Rs21,800 per kilolitre.
According to a report compiled by the Federation of Indian Airlines (FIA), 'Improving the financial health of India's airline industry through reduction in the cost of ATF', the estimated annual fuel bill for the industry, based on September 2006 rates (Rs43,989 per kilolitre) is around $1.7 billion.
Following the dismantling of the administered price mechanism (APM) from April 2001, the price of ATF in India is based on international import parity prices, and directly linked to the benchmark of Platt's publication of FOB Arabian Gulf ATF prices (AG). These prices, according to the FIA report, do not reflect the actual cost of producing ATF in India.
ATF prices for domestic operations include freight charges from the Gulf to India, ad valorem customs duty of 10% (which adds up to an effective rate of approx 20% inclusive of the CVD and cess), domestic transportation and other charges, excise duty of 8.24% (including cess), sales tax levied by State governments that average at 25% across the country. All these costs, along with the marketing margin of oil companies and throughput charges paid to the airports authority, are over and above the Arabian Gulf ATF prices.
The study states that sales tax on ATF for Indian carriers flying international routes has already been withdrawn. Though the VAT rates on inputs and final products across the different states have been set at 4% and 12.5%, the VAT Act allows special rates to be charged for fuel and ATF under Schedule-III of the state VAT Acts.
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