India cuts jet fuel prices 3% on back of lower import costs

The Indian government on Monday reduced the prices of aviation turbine fuel (ATF) for commercial aircraft by about 3 per cent on the back of softening international oil rates.

This is the first central reduction in two months. The actual prices will of course differ from state to state depending on local taxes. In Delhi, jet fuel will now cost Rs74,072.20 per kilolitre, while in Mumbai – with a Maharashtra government known for its swingeing tax regime – the new price is Rs76,524.33 per kl.

The reduction follows two rounds of price hikes - a Rs597.48 per kl or 0.8 per cent increase on 1 December 2013 and a Rs2,036.59 per kilolitre, or 2.74 per cent hike on 1 January 2014.

ATF prices had touched an all-time high of Rs77,089.42 per kl in October last year following five consecutive increases since June as the rupee depreciated against the US dollar, making oil imports costlier.

However, the rupee's subsequent appreciation helped trim costs, leading to a steep 4.5 per cent cut in prices in November. Rates, however, were increased in the subsequent months as the rupee value dipped marginally.

Jet fuel constitutes over 40 per cent of an airline's operating costs. The country's three fuel retailers – Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL), and Bharat Petroleum Corp Ltd (BPCL), all state-owned - revise jet fuel prices on the first of every month, based on the average international price in the preceding month.