Air India to get benefit of Rs 480 cr from ATF purchase

Discount on aviation turbine fuel offered by oil companies is Rs 5,000 a kilolitre

Air India has struck a deal with oil companies to buy aviation turbine fuel (ATF) at a discount of about seven per cent. This would help the airline save Rs 480 crore on fuel consumption annually.

According to a senior civil aviation ministry official, the discount offered by the oil companies is about Rs 5,000 a kilolitre. The discount offered to Jet Airways is about Rs 3,000 a kilolitre. The official added only German airline Lufthansa was offered a hefty discount.

Discounts by oil companies depend on factors such as customer loyalty and timing of payments. In the last five months, Air India has paid its dues to oil companies on time. It is expected the carrier would pay about Rs 4,000 crore of previous dues to oil companies in April.

“The oil companies were not offering us any discounts, as Air India was not paying its dues to them. Now, oil companies have re-negotiated ATF prices with Air India, as the airline’s performance has improved and we are committed to paying all arrears to oil companies by April,” the official said. Air India would clear all dues to airport operators, oil companies and pay performance-linked incentives to its employees by April, he added.

Air India meets 60 per cent of its annual ATF requirement of about 960,000 kilolitres from Indian Oil Corporation and the rest from Bharat Petroleum Corporation, Hindustan Petroleum Corporation and other private companies. Annually, Air India spends about Rs 6,700 crore on ATF.

The oil ministry has agreed to bring ATF under the ‘notified commodity’ list, and it is expected this would make the fuel’s pricing transparent. In India, sales tax on ATF is about 24 per cent, second only to Bangladesh (27 per cent). For international operations, no sales tax or value-added tax is charged on ATF consumption.