OMCs raise jet fuel price by 8.7%

The price of non-subsidised LPG was cut by Rs 4 for a 14.2-kg cylinder. Non-subsidised LPG now costs Rs 509.50 in Delhi against Rs 513.50 previously

Aviation turbine fuel (ATF), or jet fuel, price was on Friday raised by 8.7 per cent but that of non-subsidised liquefied petroleum gas (LPG) was cut by Rs 4 a cylinder on global trends.

ATF price in Delhi was raised from Rs 38,785 a kilolitre , or 8.69 per cent, to Rs 42,157.01, oil companies said on Friday.

The hike comes on the back of a marginal 1.3 per cent or Rs 515.85 cut in rates on March 10. Prior to that, rates were raised by a steep 12 per cent, on March 1. The March 1 hike broke the cycle of three consecutive monthly price reductions.

Jet fuel constitutes 40 per cent of an airline's operating cost and the price increase will add to the financial burden on cash-strapped carriers.

Simultaneously, the oil firms cut prices of non-subsidised LPG by Rs 4 for a 14.2-kg cylinder. Non-subsidised LPG now costs Rs 509.50 in Delhi against Rs 513.50 previously. This is the third reduction in rates in a row. Prices were last cut by Rs 61.50 on March 1.

Subsidised LPG costs Rs 419.33 for a 14.2-kg cylinder in Delhi.

The three oil marketing companies (OMCs) — Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum — revise jet fuel and non-subsidised LPG prices on the first day of every month, based on the average international price in the preceding month. The ATF price cut on March 10 was on account of change in taxation.

Jet fuel price is now 15 per cent lower on a year-on-year basis but the recent price revisions have led to protests from airlines. A senior official with one of the OMCs said the revision in domestic jet fuel rate was in line with similar revision in benchmark rates of Argus and Platts indices for the Gulf region. However, airlines have contested the claim citing a decline in crude oil price and strengthening of the Indian rupee in the past couple of months.

The Federation of Indian Airlines has demanded a rollback of the price hike in jet fuel and threatened to approach the Competition Commission of India against the three OMCs. The oil companies have denied the charge that they are profiteering from the price rise.

Fuel expense now constitute 30-35 per cent of airlines’ total expenses, down from 40-45 per cent a year earlier owing to a sharp decline in jet fuel prices for most part of last year.

Aviation consultancy CAPA has revised its FY16 profitability outlook for domestic airlines. It expects industry-wide losses to reduce to $500-550 million, down from the earlier estimated $680-750 million. This is largely expected due to better profits of low-cost airlines and reduction in Air India’s loss with low fuel costs, stable rupee, strong passenger growth being the key drivers for improved results.