Airlines can pay fuel bills in six instalments

22 Oct 2008

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New Delhi: In what would be a reprieve for most airlines in the domestic aviation sector, the government has allowed them to pay up the collective Rs2,962 crore outstanding in terms of the amount they owe to the public sector oil marketing companies for fuel, six monthly instalments.

Further, the government has also given the cash-strapped airlines a 90-day grace period to pay for their current fuel purchases.

Murli Deora, oil minister With the global economic slowdown and the high price of jet fuel shrinking growth for the already loss-making airlines, public sector oil marketing companies Indian Oil, Bharat Petroleum, and Hindustan Petroleum have decided to now revise jet fuel prices every 15 days, instead of the current  practice of doing so on a monthly basis. This will shorten the time lag between revisions in the international prices of the commodity, and the time when airlines start buying at those prices.

These decisions were made at a meeting called by petroleum minister Murli Deora and attended by civil aviation minister Praful Patel along with representatives of the oil companies and airlines. Senior officials of the ministry of civil aviation, ministry of petroleum and natural gas, the oil PSUs and representatives of the airlines industry were also present.

A couple of days earlier, Prime Minister Dr Manmohan Singh was reported to have intervened in the ongoing stand-off between the public sector oil companies who have demanded payment for unpaid fuel bills from the airlines. Reports said the Prime Minster had asked the oil minister Murli Deora and civil aviation minister Praful Patel to talk and resolve the issue at the earliest.

As a result of the decisions agreed to in the meeting, Jet Airways would now have to pay its Rs1,057 crore due to the oil companies by 31 March, 2009. Similarly, Kingfisher Airlines too would need to clear its Rs983 crore outstanding over the next six months. 

State-owned National Aviation Company of India Ltd (NACIL), which is the owner of flag carrier Air India, will have to pay for the fuel it bought so far, worth Rs886 crore, in a six month period.

Speaking to the media, civil aviation minister Praful Patel said that for current uplifting, i.e. jet fuel sales to airlines, the oil marketing companies would give a 90-day credit period, and the arrangement would last till March 2009 to allow the airlines a breather. Thereafter, the airlines and oil companies will revert to their individual commercial agreements. 

Jet Airways was reported to be working on a 60-day credit period for its fuel bills with the oil companies, while NACIL was reportedly following the cash-and-carry model. Kingfisher is reported to have a credit period ranging somewhere between 30 and 60 days.

Petroleum minister Deora cautioned all the airlines that during the tenure of this reprieve, the airlines would not lay off their employees as a cost cutting measure. 

The key decisions arrived at during the meeting were summarised as:

  • A 90-day credit period would be given by the oil companies to the airline companies up to 31 March, 2009 following which the situation will be reviewed to pay their credit.
  • The airlines industry can pay their present cumulative outstanding credit in 6 monthly instalments by 31 March, 2009.
  • The ATF prices will be revised every 15 days to be at par with the world market prices, in view of the fluctuation prices of crude oil in the international market.

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