Airlines should tie-up with suppliers to import jet fuel

February 16th, 2012 - 9:38 pm ICT by IANS  

Pranab Mukherjee New Delhi, Feb 16 (IANS) The civil aviation ministry Thursday said domestic airlines interested in importing jet fuel should tie up with suppliers who have the infrastructure to import the fuel directly.

The ministry said that it had written to the commerce ministry to expedite the process of granting direct fuel import licences to the airlines as actual users.

“The Indian carriers would have to make their own tie-ups with the suppliers having infrastructure to import ATF directly for their use,” the ministry said in a statement.

“The ministry of civil aviation has written to the ministry of commerce on Feb 15, 2012 to take steps to allow direct import of air turbine fuel (ATF) by Indian carriers.”

The announcement was significant as doubts were being raised over the implementation of the direct fuel imports by airlines as none had come out with any logistics plan for storing and importing the fuel.

This was also one of the arguments by the three oil marketing companies, Hindustan Petroleum, Indian Oil and Bharat Petroleum, which were opposing the move.

The tie-up between airlines and suppliers would favour the OMCs and private players such as Reliance Industries and Essar Oil.

On Feb 7, a group of ministers (GoM) led by Finance Minister Pranab Mukherjee had rolled out a plan to help domestic carriers allowing them to directly import aviation fuel.

The civil aviation sector, one of the fastest growing, has seen major private airlines bleeding as rising prices of ATF caused by high sales tax and other levies dented their margins.

The move will enable airlines to cut operating costs by about 10-15 percent, saving on sales tax, which ranges between three and 35 percent and is levied by state governments, when they directly import jet fuel as an end user.

Jet fuel now comprises about 50 percent of the total operating cost of airlines in India.

Domestic airlines are estimated to have lost around Rs.3,000 crore in the first six months of this fiscal.

Singh also wrote to all state chief ministers to urge them to bring down sales tax on ATF as revenue from it only contributes 0.5 percent to two percent of the total collection.

“However, most of the states have not responded favourably,” said the statement.

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