SpiceJet first to get nod for jet fuel import

SpiceJet on Wednesday became the first airline to receive the government’s approval for directly importing aviation turbine fuel (ATF), a development that will enable it to lower fuel bill by seven per cent.

“SpiceJet is negotiating with leading oil marketing companies. We are hopeful of commencing the import of fuel in due course. Importing fuel from overseas markets at comparatively lower price would help us considerably bring down our operational cost,” said a release from the airline.

Reliance Industries Ltd (RIL) is likely to import jet fuel for SpiceJet. RIL is the only private oil marketing company that has infrastructure in 20 airports across the country.

The low-cost airline will start importing fuel at an airport in southern India on a pilot basis to check the economic viability of the process.

After requests from the industry, the government recently allowed airlines to import fuel directly. The relaxation was aimed at giving a respite to domestic carriers, which had to mandatorily buy ATF from public sector oil companies and pay sales tax of 22-24 per cent. making the fuel one of the most expensive in the world.

At 24 per cent, the average tax on jet fuel in India is the world’s second highest after Bangladesh, where it is at 27 per cent.

By importing it directly for consumption, airlines can save up to Rs 13,000 on every tonne of ATF at current prices, or Rs 2,500 crore a year.

High crude prices are one of the reasons for the losses made by Indian carriers. Fuel costs for Indian carriers constitute 50 per cent of the total operating cost, which has increased from 40 per cent in the past six months.

Kingfisher Airlines and Air India are the other two airlines which have shown interest in importing jet fuel directly.