SpiceJet likely to use RIL infrastructure to import jet fuel

Airline may save up to 7% on fuel cost

SpiceJet will import aviation turbine fuel (ATF) through a private oil marketing company at an airport in southern India on a pilot basis to check the economic viability of the process.

Reliance Industries Ltd is likely to import the ATF for the low-cost airline, which has applied for permission to import fuel directly before the Director General of Foreign Trade.

“A private oil marketing company has agreed to provide us the infrastructure at the airports and also import fuel for us. As a pilot project to assess the cost advantage of importing directly, we will start importing it directly at an airport in southern India. We expect to start the operation in six to eight weeks,” said Chief Executive Officer Neil Mills. This will mean SpiceJet will save up to seven per cent in its fuel bill.

Though Mills refused to share the name of the oil company, an industry executive confirmed Reliance Industries Ltd would import the fuel for them.

“We have storage facilities at 20 airports across the country and are likely to import fuel for them. Discussion are on with the airline,” the oil industry executive, on condition of anonymity, said.

Reliance Industries Ltd and Essar Oil are the two private oil marketers in the country, but Essar does not have any ATF tanking facility in any port or at airport.

“It will take us some time to reach a figure on the actual savings, but our preliminary calculations show the savings could be in the range of five to seven per cent on fuel costs,” he said.

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

The average tax on jet fuel in India — at 24 per cent — is the world’s second highest only to Bangladesh, which is at 27 per cent.

By importing it directly for own 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 is 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 who have shown interest in importing jet fuel directly.