Govt To Reduce Aviation Fuel Prices

Prices of aviation turbine fuel (ATF) for domestic airlines will be reduced shortly. The government has decided to rationalise duty structure for ATF in a manner that the difference in prices of ATF available to domestic and international airlines is bridged in three equal instalments.

This decision was taken at a meeting convened by the finance ministry here on Tuesday. Beside other senior government officers, the meeting was attended by petroleum secretary T S Vijayaraghvan.

Though the government reiterated in the 1998-99 Union budget its commitment to provide a petroleum tax code consistent with the dismantling of administered pricing mechanism (APM) in the oil sector, it has been dragging its feet over reducing duties on ATF. ATF, along with motor spirit, is used for cross subsidising some other highly subsidised petroleum products like kerosene and LPG.

However, domestic airlines, including Indian Airlines, have been pressing for a duty restructuring of ATF as the prevailing rates of duty make it very expensive for domestic carriers.

While ATF is available to domestic airlines for Rs 14,500 per kilolitre, to foreign airlines it is available for Rs 8,500 per kilolitre.

While fuel bill accounts for about 20 per cent of the total operating cost of international carriers, it is nearly a third of the total expenditure for Indian operators.

Air-India spends around Rs 800 crore a year in fuel cost while Indian Airlines spends around Rs 650 crore.

Air-India buys nearly half its fuel from international stations especially those places where it is the cheapest. Indian Airlines, which flies to 17 international destinations, has also been trying to lift more and more of its requirements from abroad.