Airlines get GoM nod to import fuel directly

The Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee has cleared a proposal to allow Indian carriers to import fuel directly.

“The GoM has cleared the proposal to allow Indian carriers to import fuel directly and the final clearance will come from the Cabinet,” Union Civil Aviation Minister Ajit Singh said after the GoM meeting.

Importing fuel directly would help airlines save at least Rs 2,500 crore annually, a fourth of their total aviation turbine fuel (ATF) bill of Rs 10,000 crore.

Average tax on jet fuel in India is 24%, which is second highest in the world second only to Bangladesh at 27%. Fuel cost is around half an airline’s total operating cost is one of the reasons for losses incurred by them.

Allowing any airline to import oil directly will require the government to change the Foreign Trade Policy (FTP).

DGFT has the power to relax the norms, provided certain stringent conditions are met as laid out in the FTP, which categorically mentions there has to be a genuine damage in the event of which this relaxation can be given

The FTP of 2009-2014 stipulates that import of ATF will be allowed through a particular state trading enterprise, and in India, it is only the Indian Oil Corporation that can import jet fuel.

The aviation stocks were trading over 10% higher after the news. Jet Airways was 12.48% higher at RS 335.25, Kingfisher Airlines was up 16.31% at Rs 29.95 and SpiceJet 10.98% higher at Rs 27.30.